South Korea's economy expanded at the fastest clip in three quarters during the July-September period.

The Bank of Korea said Friday that Asia's fourth-largest economy grew 2.6 percent from a year earlier.

From three months ago, it expanded 1.2 percent, the first time in 1 1/2 years that South Korea's economy expanded more than 1 percent on a quarterly basis.

The central bank lowered its key policy rate twice this year to a record low of 1.5 percent as consumer spending slowed and exports dropped.

The government introduced a tax cut and added an additional public holiday to boost the recovery as the Middle East respiratory syndrome sapped consumption while a slowdown in China hit exports.