S.Korea's economy grows at fastest pace for year

South Korea's economy grew at the fastest pace for a year on a quarterly basis in January-March thanks partly to strong industrial output, according to the central bank.

A rise in demand and strong government spending also helped offset softness in the construction and agricultural sectors.

Gross domestic product rose 0.9 percent in the first quarter compared with October-December, the highest quarter-on-quarter rise since the 1.3 percent expansion in January-March 2011.

Household consumption, government spending and capital investment all recorded growth, after posting quarterly losses in October-December.

Year-on-year GDP expanded 2.8 percent, the slowest on-year rate for two and a half years, and policymakers in the export-dominated economy are braced for a possible continued slowdown in European demand.

Last week the central bank cut its growth forecast for 2012 to 3.5 percent from 3.7 percent, citing a potential global slowdown including waning shipments to debt-hit Europe.

The finance ministry has said it would heavily front-load this year's budget spending in the first half of the year.

HSBC Global Research said Thursday's figure reflects stabilising business conditions and a strong government stimulus package but it said household consumption must rise for growth to be sustained, especially as public spending eases in the second half.

"For now, growth is stabilising and the strong sequential uptick adds further support to our view that the worst may be over in Korea," it said in a commentary.

"External risks remain high, but assuming no severe shocks in global economic conditions, Korea remains on track for a gradual recovery in 2012."

-- Dow Jones Newswires contributed to this report --

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