The South Korean economy grew 1.5 percent in the second quarter from three months earlier on the back of robust exports and improving domestic demand, the central bank said Monday, underpinning optimism that the local economy is on a solid recovery track.
In the April-June period, the country's gross domestic product (GDP), the broadest measure of economic performance, expanded 7.2 percent from a year earlier, according to an advance estimate by the Bank of Korea (BOK). In the first half, the Korean economy grew 7.6 percent from the previous year.
The quarterly growth rate beat a 1.2 percent expansion predicted by the central bank on July 12, but the pace of growth slowed from a 2.1 percent on-quarter expansion seen in the first quarter.
"Private spending showed solid growth and facility investment and overseas shipments of goods sharply expanded," the central bank said in a statement.
The data came as the BOK unexpectedly raised the key interest rate for July to 2.25 percent from a record low of 2 percent to curb inflationary pressure, heralding the start of South Korea's stimulus exit.
Reflecting optimism about the economic recovery, the BOK upgraded its 2010 growth forecast to 5.9 percent from an earlier projection of 5.2 percent. The government put its economic growth estimate at 5.8 percent for
this year.
Exports, which account for about 50 percent of South Korea's GDP, jumped 7.1 percent on-quarter in the cited period after expanding 3.7 percent in
the first quarter.
Private spending, one of the main growth engines of the Korean economy, gained 0.8 percent, compared with a 0.7 percent gain in the preceding quarter.
Facility investment climbed 8.1 percent after advancing 2.4 percent in the first quarter, while construction investment contracted 3.4 percent
after growing 1.3 percent three months earlier.
As the South Korean economy is on a solid recovery path despite renewed concerns about the flagging global economy, risks of higher inflation are looming large, analysts say.
They noted that the BOK is expected to hike the rate further within this year, but the pace will not be quick because it would want to check the development of the eurozone debt problems and other economic uncertainties.