Korea's economy grows, but consumption sluggish in July, Aug.: BOK report

South Korea's economic growth inched up in July and August, compared with the second quarter, on increased exports and facility investment, but consumption still remained weak, the central bank said Wednesday.

Asia's fourth-largest economy has been on the modest recovery track since the fourth quarter of last year as its overseas shipments are faring well, weathering the yen's weakness and China's slowdown, the Bank of Korea (BOK) said in its newly issued report dubbed the BOK Golden Book.

The Korean version of U.S. Federal Reserve's Beige Book was released for the first time and is based on monitoring of economic conditions in seven regional areas. The BOK Golden Book will be released in the middle of every quarter.

"Monitoring results showed that economic conditions are not much different from the BOK's growth path previously estimated,"

Shin Woon, the director general at the BOK's research department, told a press conference.

The central bank earlier said the local economy is expected to grow around 1 percent every quarter until 2014, adding that it is likely to grow 2.8 percent this year. The Korean economy grew 1.1 percent on-quarter in the April-June period, the fastest growth in more than two years, on the back of fiscal and monetary stimulus measures.

The report said that exports, led by tech products, maintained the growth trend in July and August, compared with the second quarter, and tech companies increased facility investment.

But it noted that consumer spending still remained lackluster by staying almost flat in the cited period, indicating that consumers are refraining from spending money amid the economic uncertainty and a pile-up of household debt.

"Consumer spending is not likely to return to the full-fledged recovery trend for the time being," the report said.

Despite the economic recovery, the Korean economy still faces downside risks such as uncertainty over the Federal Reserve's bond-buying stimulus tapering.

The report said that the economic slowdown in China was picked as the major downside risk to the Korean economy, along with the Fed's stimulus cut, the yen's weakness and electric power shortage.

The recovery of the U.S. economy is seen as a positive factor for Seoul's exports, but the Fed's risks are raising external economic uncertainty, making local companies face troubles in setting plans for facility investment. (Yonhap News)