SEOUL, April 24, 2009 (AFP) - South Korea has avoided recession by recording positive economic growth in the first quarter after a sharp fall in exports moderated, the central bank said Friday.

Unprecedented interest-rate cuts and government stimulus spending also helped the export-dependent nation record 0.1 percent growth in January-March compared to the previous quarter.

The economy had shrunk 5.1 percent quarter-on-quarter in October-December 2008, its biggest drop in a decade. A recession is defined as two successive quarters of negative growth.

Despite the positive news, Asia's fourth-largest economy still shrank 4.3 percent in the first quarter year-on-year after contracting 3.4 percent year-on year in the final quarter of 2008.

"Private spending and construction investment swung to gains and a decline in exports slowed down in the first quarter," the Bank of Korea said in a statement.

Exports fell 3.4 percent quarter-on-quarter in the three months ended March 31 after declining 12.6 percent in the fourth quarter.

Private spending grew 0.4 percent compared with a 4.6 percent contraction in the previous quarter.

Facility investment shed 9.6 percent, after falling 14.2 percent three months earlier. Construction investment rose 5.3 percent compared with a three percent decline in the final quarter of last year.

The government last month unveiled a 28.9-trillion-won (21.3-billion-dollar) extra budget to stimulate the economy, complementing extra spending announced earlier.

The central bank has cut its base rate by 325 basis points since October to a record low two percent.

Finance Minister Yoon Jeung-Hyun had said Thursday there were "some positive signs" in South Korea's economy, such as recent trade surpluses, the successful issuance of sovereign bonds overseas and positive industrial production data.

But he said uncertainty remains, underlined last month when the country recorded the highest number of job losses for a decade.

South Korea was last in recession in 1998 during the East Asian financial crisis.

The central bank predicts the economy will shrink 2.4 percent this year, the worst performance since the crisis, with growth of 3.5 percent next year.

The International Monetary Fund Wednesday maintained its previous forecast that South Korea's economy would shrink four percent this year.

It predicted modest growth of 1.5 percent next year, sharply lower than its 4.2 percent growth figure predicted three months earlier.