The International Monetary Fund on Tuesday raised its 2017 growth forecast for South Korea, as improving exports and construction investment offset elevated geopolitical tensions over the North Korea nuclear crisis.

Wrapping up a two-week visit, the IMF said it expects Asia's fourth-largest economy to expand 3.2 percent this year, up from its earlier prediction of 3.0 percent.

"The momentum is very strong," Tarhan Feyzioglu, IMF's mission chief for the country, told reporters, adding that "3.2 percent is very feasible."

It also forecast growth of around three percent in 2018.

The improved outlook comes despite worries about Pyongyang's face-off with the United States after it launched a series of missiles and conducted a sixth nuclear test over several of weeks earlier this year

Feyzioglu said the growth was led by a strong expansion in investment in the IT and construction sectors as well as continued recovery of exports.

"Export growth strengthened thanks to improving external conditions and high global demand for semiconductors," he added.

The upward revision is higher than the outlook of South Korea's central bank, which last month raised its forecast to 3.0 percent citing moderate recovery of exports and domestic consumption.

South Korean chipmakers have reported record profits in recent months on growing demand from overseas buyers coupled with rising global chip prices.

Feyzioglu, however, warned that skyrocketing household debt, which exceeds 90 percent of South Korea's gross domestic product, was a key financial risk.

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