The South Korean economy grew at the slowest pace in more than three years in the third quarter on faltering facility investment, the central bank said Thursday, raising chances that the full-year growth will likely miss the bank's 2.4 percent estimate.
South Korea's gross domestic product (GDP), the broadest measure of economic performance, grew a revised 0.1 percent in the July-September period from three months earlier, down from a previous estimate of 0.2 percent, according to the Bank of Korea (BOK).
The third-quarter growth marked the slowest gain since the first quarter of 2009 when Korea was in the midst of the 2008 global financial crisis. It also slowed from a 0.3 percent on-quarter gain in the second quarter.
The country's GDP grew a revised 1.5 percent from a year earlier in the third quarter, the slowest expansion since a 1 percent on-year gain in the third quarter of 2009.
The BOK said that the fourth-quarter growth is not likely to post a contraction, given the trend of exports, but it would be difficult for Asia's fourth-largest economy to meet the BOK's full-year estimate of 2.4 percent.
"To meet the BOK's 2012 growth forecast, the quarterly growth should reach some 1.6 percent in the fourth quarter," Jung Yung-taek, the head of the BOK's national accounts division, said at a press conference.
"But given the current trend (of economic activities), it seems to be difficult for the Korean economy to meet such a target for this year."
Asia's fourth-largest economy almost did not grow in the third quarter from three months ago, spawning concerns that the Korean economy is entering a phase of low growth, analysts say.
The BOK said earlier that the quarterly growth will pick up in the fourth quarter, but the growth pace would stay below 1 percent every quarter until the first half of next year.
Korea's exports and domestic demand remain weak amid the prolonged global economic slowdown. High household debt curbs consumer spending and companies are delaying making big capital investment due to economic uncertainty while hoarding cash.
"The track record shows that local firms refrain from making facility investment ahead of a presidential election," Jung said.
More analysts bet on an additional rate cut in the first half of next year as the new government to be launched in late February will likely pump up efforts to revitalize the economy. The BOK cut the key interest rate in July and October.
"The Korean economy may have bottomed out in the third quarter, but the recovery pace is widely expected to be very moderate down the road," said Lee Sung-kwon, a senior economist at Shinhan Investment Corp. "A rate cut is widely anticipated in the second quarter of next year."
Exports, which account for about 50 percent out of the economy, grew 2.8 percent on-quarter in the third quarter, better than its earlier estimate of 2.5 percent, according to the BOK.
Private spending rose 0.7 percent last quarter, compared with a previous estimate of 0.6 percent.
Facility investment fell 4.8 percent, worse than its previous projection of a 4.3 percent contraction and construction investment grew 0.1 percent, lower than a 0.2 percent gain previously estimated. (Yonhap News)
