South Korea's economy grew a revised 1.1 percent in the third quarter from the previous quarter, up from 0.9 percent growth estimated earlier, the central bank said on Friday, raising the chances of an interest rate rise.
The seasonally adjusted reading in gross domestic product for the July-September quarter, which was released before financial markets opened, follows growth of 0.8 percent in the second quarter and 1.2 percent in the first quarter.
Economists said the central bank, which had expressed concerns that an overheated local housing market could harm the financial and household sectors, would feel more free to raise borrowing costs as necessary.
"This raises the probability of an interest rate increase because the data eases worries about an economic slowdown, allowing the central bank to boost interest rates if it wants to and if housing prices remain firmer," said Kong Dong-rak, a fixed-income analyst at SK Securities.
"We expect the quarterly growth to maintain a pace of more than 1 percent next year, led by construction and exports. Our forecast is that interest rates will be raised as early as the first quarter (of 2007)."
The annual growth rate for Asia's third-largest economy was also revised up to 4.8 percent from 4.6 percent first estimated by the Bank of Korea in October. It follows growth of 5.3 percent in the second quarter and 6.1 percent in the first.
Growth rates were revised higher in all major categories.
Finance Minister Kwon O-kyu said in November the annual economic growth rate for the third quarter would probably be revised upward due to a stronger-than-expected performance in
Both the central bank and the finance ministry have said annual GDP growth would slow next year after picking up to about percent this year from 4.0 percent in 2005.
The central bank raised interest rates to a five-year high of 4.50 percent in five steps between October last year and August this year.