South Korea's economic growth reached a five-year high in the third quarter thanks to a strong rebound in domestic demand, central bank data showed Friday.

The economy grew 1.2 percent on-quarter in the July-September period, the first time in five quarters that growth exceeded the 1 percent mark, according to the preliminary data by the Bank of Korea.

This is the highest reading since 1.7 percent growth tallied in the second quarter of 2010.

Consumer spending has rebounded as the impact of the Middle East Respiratory Syndrome outbreak has receded, the central bank said, adding that increased investment in the construction sector contributed to the solid growth in the gross domestic product.

From a year earlier, Asia's fourth-largest economy expanded 2.6 percent, also growing at a faster pace compared with the 2.2 percent on-year gain reported for the second quarter. The rebound is the first in five quarters.

In the second quarter, the GDP edged up just 0.3 percent vis-a-vis three months earlier as the MERS scare, a severe drought and negative export growth weighed down the economy.

The preliminary numbers are also higher than the 1.1 percent growth predicted by the BOK for the third quarter in July.

"Domestic demand rose on the strength of consumers buying more durable goods and growth in services, with the construction sector fueling growth," the BOK said. "Measures to spend the extra budget as soon as possible helped as well."

Consumer spending rose 1.1 percent from three months earlier, a turnaround from a 0.2 percent drop in the second quarter.

Investment in the construction sector, helped by demand for more buildings and civil building projects, jumped 4.5 percent on-quarter.

Government spending growth picked up to 1.9 percent from 0.8 percent in the April-June period. Facility investment, another key factor in growth, rose 2 percent, quickening from a 0.5 percent rise in the previous quarter.

On the downside, exports, the key driver of the country's growth, contracted 0.2 percent compared with the second quarter.

The central back cited weak demand for liquid crystal displays, chemical products and ships.

Domestic consumption added 1.9 percentage points to the third-quarter growth, with government spending and construction pushing up growth by 1 percentage point. Exports, in contrast, pulled down growth by 0.7 percentage point.

The BOK said that gross domestic income, representing the sum of all income earned while producing goods and services within a nation's borders, rose 1 percent on-quarter, unchanged from growth reached in the previous quarter, and up 7.1 percent from the year before. (Yonhap)