April 19, 2024

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South Korea’s economic growth will likely slow down further this year, possibly falling below the 2 percent mark for the first time in 10 years, analysts said Oct. 24.

The gloomy outlook comes after the Bank of Korea said the local economy grew 0.4 percent from three months earlier in the third quarter, marking a sharp slowdown from a revised 1 percent on-quarter expansion in the previous quarter.

On an on-year basis, the local economy grew 2 percent in the second quarter and again in the third quarter.

In the first quarter, the country’s gross domestic product contracted 0.4 percent from the previous quarter, marking 1.7 percent on-year growth.

In July, the BOK predicted Asia’s fourth-largest economy to grow 2.2 percent this year. The latest growth estimate was the second downward revision from the 2.6 percent projected at the start of the year and the 2.5 percent in April.

The central bank is scheduled to offer its final growth outlook for the year in November.

“Annual growth of more than 2 percent will be possible only if the economy grows by 1 percent (on-quarter) in the fourth quarter, or 0.97 percent to be more precise,” Park Yang-su, head of the BOK’s economic statistics department, told a press briefing.

Park added the 1 percent on-quarter growth in the second quarter may have been possible due to a base effect created by the unexpected 0.4 percent contraction in the previous quarter, the slowest on-quarter growth in a decade.

“I am not in a position to comment on the possibility of 2 percent annual growth, but there still remain uncertainties regarding the U.S.-China trade dispute, along with other geopolitical risks, such as the South Korea-Japan trade spat and the crisis in Hong Kong,” he told the briefing.

The BOK chief repeated his gloomy outlook for the local economy Thursday but insisted whether the country‘s growth rate will fall below the 2 percent mark is still not determined.

“A 2 percent growth this year may not be easy as of now, but it is still not determined as there are many factors in the fourth quarter, such as a government plan to enhance its fiscal measures,” he said while speaking before the parliamentary finance committee in an interpellation session.

Finance Minister Hong Nam-ki, also speaking before the committee, vowed all-out government efforts to keep the economy growing at over 2 percent.

“The government will do its utmost in the fourth quarter by mobilizing all available resources to achieve an annual growth of over 2 percent,” he said, adding, “It is important to make sure that government spending is executed properly.”

By Ram Garikipati and newswires (ram@heraldcorp.com)