* South Korean economy faring better than earlier thought
* Interest rates to rise from early 2010
* Policy interest rate to add 1 percentage point in 2010
* Trade surpluses to keep won up throughout 2009-2010
By Cheon Jong-woo and Yoo Choonsik
SEOUL, July 15 (Reuters) - South Korea's economy is pulling out of the crisis sooner than previously thought and will post solid growth next year, allowing the central bank to unwind its loosened monetary policy from early 2010, a Reuters poll shows.
Asia's fourth-largest economy is expected to shrink 1.7 percent this year and grow 4 percent in 2010, median forecasts from the survey show, compared with a 2.5 percent fall and a 4 percent rise forecast in the previous poll published in April.
The Bank of Korea will keep the benchmark 7-day repurchase agreement rate unchanged at a record-low 2 percent through the end of this year, but will begin raising it from early 2010 to bring it to 3 percent by the end of the year, the survey shows.
"The global economy will be in a much better shape next year compared to the present, which will boost Korean exports. That will in turn help lift domestic demand," Park Sang-hyun, chief economist at HI Investment & Securities.
South Korea's economy derives 60 percent of its annual output from the domestic service industry against 28 percent from the export-led manufacturing sector, but overseas sales are the top driver of growth due to the spillover effect at home.
The Bank of Korea raised its view on the economy on July 10, revising its forecast for this year to a contraction of 1.6 percent from a 2.4 percent drop previously and next year's to a gain of 3.6 percent from 3.5 percent growth.
It cut the benchmark interest rate by a total of 3.25 percentage points between October last year and February this year but has since held it steady on signs that the economy and financial markets are stabilising.
WON SEEN UP MORE THAN 10 PCT
The latest forecast would still make this year's economic performance the worst since the economy shrank by 6.9 percent in 1998 in the aftermath of the Asian financial crisis.
For details of the South Korea poll results, double-click on.
South Korea's consumer inflation will accelerate slightly more than earlier expected in both years as the economy expands and oil prices rebound, but will still stay below the five-year average of 3.2 percent, the survey shows.
"The expected pace of economic growth may not be fast enough to stir big problems immediately, but the Bank of Korea should move boldly to raise interest rates in a pre-emptive manner," said Im No-jung, economist at Solomon Investment & Securities.
A sharp depreciation in the won since last year will allow South Korea to enjoy a jump in its trade surplus, which will keep the won on a sustained appreciation trend against the dollar throughout the two years, economists predicted.
The won, which has dropped more than 20 percent over the past year, is now expected to gain 6 percent for the rest of this year to 1,212.5 per dollar and by another 8.3 percent in 2010. (Editing by Kim Coghill)