South Korea’s economy grew more slowly than expected in April-June, central bank figures showed, as the eurozone debt crisis hit exports and consumption cooled down.
Gross domestic product increased 0.4 percent from January-March compared with a 0.9 percent quarter-on-quarter increase three months earlier.
Year-on-year the export-dominated economy expanded 2.4 percent in the three months to June, a slowdown from 2.8 percent in the first quarter and the weakest annualised growth since a 1.0 percent rise in July-September 2009.
“Growth in private consumption slowed, while exports and facilities investment swung to negative growth,” the Bank of Korea (BOK) said on Thursday.
The second-quarter performance was below its initial estimate early this month and also lagged market expectations.
The central bank and economists surveyed by Dow Jones Newswires had forecast a 0.5 percent quarter-on-quarter expansion, and 2.6 percent year-on-year.
The bank was expected to come under pressure for another rate cut as early as next month, after a surprise cut of 25 basis points on July 12.
Its governor Kim Choong-Soo on Wednesday had stressed growing downside risks to the bank’s 2012 growth forecast of 3.0 percent. That prediction had been reduced from 3.5 percent just two weeks ago.
The bank said exports fell 0.6 percent quarter-on-quarter in April-June after growing 3 percent three months earlier.
Private spending grew just 0.5 percent, slowing from 1 percent growth in the preceding quarter.
Facility investment shrank 6.4 percent after growing 10.3 percent in the first quarter. Construction investment grew 0.3 percent after falling 1.2 percent in the previous quarter.
Analysts said Asia’s fourth largest economy is likely to grow in the two-percent range this year unless Europe can end its protracted debt crisis.
“Unless the eurozone situation turns better, there is a high chance that the local economy will likely grow below three percent this year due to weaker exports and sluggish domestic demand,” Lee Sang-Jae of Hyundai Securities told Yonhap news agency.
“The BOK will likely cut the key rate one more time and a potential third rate reduction will depend on how external conditions develop.”