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(Bloomberg) — South Korea’s economy rebounded in the third quarter as an outbreak of the Middle East Respiratory Syndrome receded and consumers ventured back to the shops, offsetting weakness in sales abroad.

Gross domestic product expanded 1.2 percent from the three months through June, when it grew by only 0.3 percent, the Bank of Korea said Friday. Economists surveyed by Bloomberg had projected a 1 percent increase. GDP expanded by 2.6 percent from a year earlier.

Policymakers including Finance Minister Choi Kyung Hwan and Bank of Korea Governor Lee Ju Yeol have highlighted positive signs in the economy, while cautioning that risks remain from weakness and uncertainties in overseas markets. The government introduced temporary consumption tax cuts and an extra budget afterMERS spread to Korea in May, frightening away foreign tourists and local shoppers. Authorities declared in July that the virus was no longer a concern.

“Improved growth would give the BOK some justification to hold interest rates for now,” An Ki Tae, a Seoul-based economist at NH Investment & Securities Co., said before the release. He added that the softness of growth in the second quarter could make the latest figures look stronger than they really are.

Property Boom

Private-sector consumption rose 1.1 percent in the third quarter from a contraction in the previous period, while government spending increased 1.9 percent and facilities investment rose 2 percent, Friday’s statement showed. Construction investment gained 4.5 percent as the property market boomed.
The central bank held its key interest rate unchanged at a record low 1.5 percent on Oct. 15. It adjusted its 2015 growth forecast the same day to 2.7 percent from 2.8 percent, citing lower-than-expected second-quarter growth. The BOK’s monetary policy committee next meets to decide rates on Nov. 12.
Private analysts surveyed by Bloomberg from Oct. 8 to Oct. 13 were more pessimistic about Korea’s economy, forecasting 2.4 percent GDP growth for this year.

Exports, which have fallen every month this year, will contribute less to growth than domestic demand, the BOK said on Oct. 15.

Citigroup Inc. postponed its call for a rate cut until 2016, citing reasons including an improvement in domestic demand.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net Jodi Schneider