South Korean economy grows 0.7% in Q3

2011-10-27 14:55:30

South Korea's economy grew at its slowest pace for three quarters in July-September due to weak consumer spending and a fall in corporate investment amid global economic gloom, the central bank said Thursday.

Gross domestic product grew 0.7 per cent in the third quarter, slowing down from 0.9 per cent in the second quarter.

Year-on-year, Asia's fourth largest economy grew 3.4 per cent in July-September from the same period in 2010, the same pace as in April-June.

Analysts expect the export-dominated economy to remain subdued for the rest of the year due to the eurozone sovereign debt crisis and the weak US economy.

The central bank is expected to leave the key interest rate unchanged at 3.25 per cent for a considerable period.

The Bank of Korea said exports gained 2 per cent quarter-on-quarter in July-September after expanding 1.2 per cent three months earlier.

Private spending rose by 0.6 per cent, slowing down from a 0.9 per cent increase in the previous quarter.

Facility investment fell 0.4 per cent after growing 3.9 per cent in the second quarter. Construction investment grew 2.2 per cent after rising 1.6 per cent in April-June.

"Capital spending fell in the third quarter as companies delayed their investment amid high economic uncertainty," senior central bank official Kim Young-Bae told a press conference.

"Consumer spending remained weak as high inflation and sharp falls in stock prices, driven by Europe's debt crisis, dented domestic demand," Yonhap news agency quoted him as saying.

Kim said the economy would likely grow below the bank's previous forecast of 4.3 per cent this year, but dismissed talk of a downturn.

"In the fourth quarter, the growth number is forecast to be better than the third-quarter one. It can be said that the local economy hit bottom in the third quarter," Kim said.

Moody's Analytics agreed, saying growth is slightly below trend but the economy remains resilient and on track for a soft landing.

In a commentary it noted that export figures were particularly strong, suggesting little impact from the easing global economy in the third quarter.

"There isn't too much cause for concern here and our current forecast for 3.6 per cent GDP growth in 2011 and 3.4 per cent in 2012 remain intact," Moody's Analytics said.