Containers are unloaded from cranes at a port in Busan, in this file photo taken on Sept. 1 2023. Yonhap

Korea's economy grew at the fastest pace in over two years in the first quarter of the year on the back of a continued recovery in exports and a rise in construction investment, central bank data showed Thursday.

The country's real gross domestic product — a key measure of economic growth — increased at a higher-than-expected rate of 1.3 percent on-quarter in the January-March period, according to preliminary data from the Bank of Korea (BOK).

The first-quarter expansion beat the market estimate of 0.6 percent and the 0.6 percent on-quarter expansion in the September-December period.

The reading marks the highest since the fourth quarter in 2021, when the economy expanded 1.4 percent.

On a yearly basis, Korea's economy advanced 3.4 percent in the first quarter, higher than the 2.2 percent growth for the last quarter of 2023.

Private spending logged a 0.8 percent rise in the January-March period, compared with a 0.2 percent advance the previous quarter.

The country's exports climbed 0.9 percent in the first quarter, slowing from the previous quarter's 3.5 percent gain, while imports declined 0.7 percent from a 1.4 percent increase the previous quarter.

Government spending gained 0.7 percent, and construction investment went up 2.7 percent in the first quarter, a shift from the previous quarter's 4.5 percent dip, according to the data.

"The first-quarter expansion was higher than our estimates in February, but it is hard to say that domestic demand will enter a full-fledged recovery," a BOK official said, adding that the central bank will unveil an adjusted economic growth estimate next month.

The better-than-expected growth came as the central bank is delaying its easing policy amid high inflation.

Earlier this month, the central bank held its key interest rate steady at 3.5 percent for the 10th straight time as it weighs a slower-than-expected moderation in inflation.

The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January.

Korea's economic growth slowed to the lowest in three years last year due to a slump in exports amid tightening monetary policies around the globe.

The economy expanded 1.4 percent last year, slowing from a 2.6 percent advance in 2022 and 4.3 percent growth in 2021.

The 2023 expansion marks the lowest since a 0.7 percent contraction in 2020 during the coronavirus pandemic.

For the year, the bank expects the economy to rebound slightly, at around 2 percent. (Yonhap)