South Korea’s economy grew at the slowest rate in 2 years in the fourth quarter, as the fallout from Europe had a bigger-than-expected drag on the export-driven country.
The quarter on quarter figure of 0.4 per cent growth was a touch softer than expectations, and represents a 3.4 per cent increase year-on-year.
The Bank of Korea blamed Europe, as per this quote from Yonhap:
“Amid sluggish domestic demand, exports turned negative,” Kim Young-bae, director general of the BOK’s economic statistics division, said at a press conference. “The sovereign debt crisis in Europe had a larger-than-expected impact on facility investment and private consumptions.”
Hopes now rest on the domestic economy. On that front there was a worrying detail in the figures: private expenditure went negative for the first time since Q1 2009.
With exports under pressure, the moderation isn’t over, says Citi:
The slowdown of overseas and domestic demand seems set to continue in 1H12 and, in turn, reduce the growth momentum, as lingering financial market stress might peak and the global economy could weaken further in the coming months while inflation could stay high at mid-3% levels.
With inflation still a bit too high for comfort, rates are on hold for now. Both Citi and the BoK still forecast growth in 2012 to come in at 3.7 per cent, which isn’t so bad relative to the rest of the world.
But if export demand drops fast, expect the BoK, and the government, to act.
Related reading:
South Korean inflation: home-baked, beyondbrics
S Korea: forecasts cut, rates to follow?, beyondbrics
S Korea GDP grows at slowest in 2 years, FT
S Korea manufacturing at three-year low, FT
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