South Korea's economic growth slows to 3.2 per cent in 3Q, lowest in more than 1 year

SEOUL, South Korea – South Korea’s economic growth slowed to 3.2 per cent in the third quarter, the lowest in five quarters, as weakness in exports and spending by companies offset the boost from government stimulus.

The Bank of Korea said Friday that Asia’s fourth-largest economy slowed from 3.5 per cent growth in the April-June quarter.

On a quarter-to-quarter basis, South Korea’s economy grew 0.9 per cent, a slight pickup from the second quarter’s 0.5 per cent growth when the shock from a deadly ferry sinking dented retail sales and consumer spending.

But the economy has expanded less than 1 per cent on quarterly basis for four straight quarters, showing the recovery is still weak.

Capital expenditure contracted 0.8 per cent from the previous quarter and exports turned negative while government spending contributed significantly to third quarter growth. Consumer spending rebounded after the April ferry sinking.

South Korea’s finance ministry said in July that it would spend an additional $11.4 billion over the rest of the year and set up another $27.4 billion stimulus to support small- and medium-sized companies through loans and financial support.

The ministry eased mortgage rules to boost the real estate market, hoping a rise in property prices would lead to increase domestic demand.

The central bank joined the government’s stimulus efforts by lowering its benchmark interest rate twice this year. It is now at a record low of 2 per cent. It also downgraded its growth forecast for this year and next citing a weak recovery in capital expenditure.