South Korea’s gross domestic product grew a modest 2.8 percent on-year in the first quarter mainly as facility investments and the steady pace of consumption offset losses in construction investment, the central bank said Thursday.

The advance estimate is the lowest since the 1 percent gain tallied for the first quarter of 2009, but a solid 0.9 percent gain from the previous three-month period, the Bank of Korea said.

The BOK said the 0.7 percent on-quarter drop in construction investment brought on by the weak real estate market weighed down first-quarter growth.

Private sector consumption gained a modest 1.0 percent compared to the last three months of 2011, with the service sector moving up 0.9 percent. The latest estimate also showed facility investment and exports all moved up.

Exports advanced 5 percent on-year and 3.4 percent on the previous quarter, fueled by strong overseas demand for autos and petrochemical products, with facility investment jumping 10.8 percent from the fourth quarter and 9.1 percent from a year earlier.

The BOK said the service industry grew 2.3 percent from a year earlier in the first quarter, while the manufacturing sector posted a 4.2 percent gain.

The estimate said the real gross domestic income rose 0.2 percent from the previous quarter for a 1.9 percent on-year gain.

Related to the first-quarter reading, Choi Sang-mok, the head of the finance ministry’s economic policy bureau, said overall figures are better than expected.

“The strong rise in investment along with the drop in inventory can be seen as a sign that industrial production can increase in the future,” he said.

The latest figure does not clearly show the country has shaken off disappointing growth tallied in the fourth quarter, but it can lead to improvements in economic expansion in the second half of this year, he added.

The central bank, meanwhile, said South Korea’s GDP is expected to rise 3.5 percent from the year before in 2012, down from a 3.6 percent gain reported for the previous year. 

(Yonhap News)