South Korean economy grew revised 1.4% in Q2

Quarter-to-quarter, gross domestic product grew 1.4 percent, slightly down from an earlier evaluation of 1.5 percent, as construction investments fell and exports grew less than expected, the bank was quoted as saying by the Yonhap News agency.

For the year, the economy was likely to achieve 5.9-percent growth, in line with an earlier prediction by the Bank of Korea, on a recovery of the private sector, said Jung Yung Taek, the head of the bank's national accounts office.

Manufacturing remained strong, with exports growing 7 percent from the previous quarter, only slightly less than the original 7.1-percent prediction, the Yonhap report said.

Private spending expanded 0.8 percent from the previous three-month period, in line with the bank's earlier estimate.

Facility investments climbed 9.1 percent, a full percentage point higher than forecast, while construction investments declined 3.6 percent, falling more than the anticipated 3.4 percent.

The economic recovery could push inflation as high as an annual rate of 3 percent by the fourth quarter, the bank said.

Bank governor Kim Choong Soo earlier said that even after July's raise, the base rate was still “highly accommodative,” leading observers to believe another hike may be coming in September.

The central bank raised the base rate to 2.25 percent in July, after holding it at a record low of 2 percent for 16 straight months in response to the global economic slowdown.

The International Monetary Fund on Thursday upgraded its 2010 growth outlook for the South Korean economy to 6.1 percent from 5.75 percent.

The fund also said that a base rate of 4 percent would be a neutral level for the country, boosting economic activity without sparking inflation.

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