GDP rises 3.4 percent in Q3 from year earlier, slowest in 21 months


South Korea’s economy failed to show a meaningful sign of improving in the third quarter, hurt by lackluster consumer spending and weaker capital investment, Bank of Korea data showed on Thursday.

According to the advance estimate of the BOK, the country’s gross domestic product grew 3.4 percent in the July-September period from a year earlier, marking the slowest pace in 21 months.

The on-quarter GDP growth slumped to 0.7 percent during the cited period, down from a 0.9 percent expansion in the second quarter.

BOK Gov. Kim Choong-soo said on Thursday at a forum not related to the central bank’s GDP announcement that the country’s current account surplus for 2012 may fall short of the earlier projection of $17 billion, citing deteriorating external factors.

The latest GDP data and Kim’s remarks combined to demonstrate that Asia’s fourth-largest economy is still mired in sluggish growth amid dimming prospects that external conditions would improve any time soon.

The figure also added credence to the view that the central bank’s earlier forecast of 4.3 percent growth for this year could be missed.

The BOK, however, painted a brighter outlook for the fourth quarter with the country’s exports keeping upward pace.

“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,” said Kim Young-bae, director general of the BOK’s economic statistics division, at a press conference.

Kim said that despite growing concerns over the faltering global economy, Korea’s sustained export growth would continue to bolster the country’s broader economy.

The problem is that exports, the perennial knight in shining armor for Korea’s economy, are likely to lose steam next year, as explained by Kim: “Although surplus from goods and merchandise trade has continued this year, exports will likely decrease next year as the eurozone debt crisis is unlikely to be resolved anytime soon and slumps in the U.S. housing and unemployment sector will continue.”

Consumer spending grew 2.2 percent in the third quarter from a year earlier, slowing from a 3.0 percent growth tallied in the second quarter.

Facility investment edged up 1.4 percent during the period, sharply down from a 7.5 percent growth recorded in the previous quarter.

The extended period of slower growth for Korea’s economy is now expected to force the BOK to wait and see for a while in tackling the inflation, as any rate hike could put a damper on the already fragile economic growth.

The central bank kept steady the key interest rate at 3.25 percent for the fourth straight month in October, arguing that deepening global economic instability takes precedence over the control of inflation, which rose higher than the bank’s target ceiling every month of this year.

By Yang Sung-jin (insight@heraldcorp.com)