South Korean economy grew at a faster pace in the first quarter of 2012 from three months earlier due mainly to the front-loaded fiscal spending, but the growth remained below potential amid weak global demand, a data released by the central bank showed Thursday.

Real gross domestic product (GDP), the broadest measure of economic performance, expanded 0.9% on-year in the first quarter, faster than a revised on-quarter growth rate of 0.3% tallied in the previous quarter, according to an advance estimate of by the Bank of Korea (BOK).

The first-quarter figure was roughly in line with market expectations as experts predicted the rebound due to the front- loaded fiscal expenditure that was expected to have positive ripple effects on the economy in the first half. "The on-quarter rebound is due largely to the front-loaded fiscal spending. Considering the loaded spending plan, GDP Growth should be higher than 0.5%," Suh Dae-il, an economist at Daewoo Securities in Seoul, said before the data release.

The South Korean government planned to spend 60% of its 2012 budget in the first half as part of efforts to respond proactively to the potential global economic slowdown. Around 32% of this year's budget was spent in the first quarter.

From a year earlier, the real GDP advanced 2.8%, down from a revised on-year expansion of 3.3% in the prior quarter. The on-year decline was attributable to the high base of comparison a year ago.

Despite the on-quarter rebound, concerns remained over the South Korea's future economic growth due to external uncertainties such as Europe's debt crisis and high oil prices. "The preliminary GDP figure will likely show an economy below trend amid weaker global demand. Korea depends strongly on exports,and local production eased as overseas sales slowed," said Glenn Levine, a senior economist at Moody's Analytics in Sydney.

Suh at Daewoo Securities placed his outlook for this year's GDP growth at a low of 3%, citing the expected economic slowdown in Europe and China, high oil prices and growth in household debts. The BOK cut its economic growth outlook for 2012 to 3.5% from an earlier estimate of 3.7%, and the global credit rating agency Standard & Poor's set its growth outlook at 3%. Although construction investment reduced, exports turned to growth trend with facilities investment growing, the BOK said. Private and public consumption also expanded in the first quarter.

Exports of goods and services expanded 3.4% in the first quarter from three months earlier, a turnaround from a 2.3% on-quarter expansion tallied in the previous quarter. The expansion was attributed to solid overseas demand for locally-made automobiles and petrochemical products that offset the underperformance of outbound shipments in handsets and steel products.

Private consumption turned to positive growth due to robust demand for durables such as computers and non-durables, including medicine. Consumption in the private sector grew 1% on- quarter in the first quarter, a turnaround from a 0.4% on- quarter contraction three months before. Consumption in the public sector also shifted to an on-quarter growth of 3.1% from a 0.8% contraction.

After posting a 4.3% on-quarter contraction in the fourth quarter, facilities investment jumped 10.8% in the first quarter form three months earlier, but construction investment declined 0.7%, hinting at the softness in the nation's housing market. On the production side, output in the building sector reduced, but production in the manufacturing and service industries continued to grow in the first quarter, the BOK said.

Output in the manufacturing sector grew 2.2% on-quarter in the first quarter, a turnaround from a 0.3% on-quarter reduction in the prior quarter. The turnaround came after underperformance in the metal and general machinery sectors was offset by outperformance in the auto and petrochemical industries.

Production in the service industry advanced 0.9% during the January-March period from three months earlier, faster than a 0.7% expansion the previous quarter. In the sector, finance& insurance companies showed a negative growth, but information & communication technology industry and health & social welfare sector performed well in the first quarter, according to the BOK.

Output in the construction sector contracted 1% on- quarter in the first quarter. Production in the non-residential sector grew, but the residential sector shrank in the first quarter, the BOK said.

Real gross domestic income (GDI), which gauges purchasing power in accordance with changes in terms of trade, grew 0.2% on- quarter in the first quarter.