The South Korean economy is trapped in low growth trends as it suffers a double whammy of weak domestic consumption and slowing exports, the central bank’s data showed Tuesday.

According to the Bank of Korea, the quarterly growth of gross domestic product remained weak at 0.7 percent in the third quarter, slowing from 0.8 percent in the previous quarter.



Real gross domestic income, a measure for people’s purchasing power, shrank 0.3 percent in the July-September period, after a 0.2 percent contraction in the previous quarter.

Quarterly GDP growth remained under 1 percent for four consecutive quarters, adding to worries that Asia’s fourth-largest economy might find it difficult to achieve 3 percent annual growth going forward. Since the second quarter of 2014, Korea’s quarterly GDP growth has failed to achieve 1 percent, except for the third quarter of 2015 which saw 1.2 percent expansion.

The slower GDP growth is attributed to subsiding domestic consumption -- once boosted by temporarily eased consumption tax -- and slumping manufacturing output in the wake of strikes at automaker Hyundai Motor and the end of Samsung Galaxy Note 7 production.

Private consumption showed a disappointing 0.5 percent growth in the third quarter, falling from 1 percent gain in the previous quarter. It may further decline this year, as an anti-graft law which went effect late last month could dampen spending on food and gifts.

Exports, the key engine for growth, also decelerated with a meager 0.8 percent expansion in the same period, backpedaling from 1.1 percent growth in the previous quarter.

The 0.7 percent GDP growth in the third quarter was mainly supported by a boom in the construction sector and government consumption. Construction investment was up 3.9 percent over the cited period, with increased supplies of both residential and nonresidential buildings. Government consumption grew 1.4 percent quarter-to-quarter, jumping from 0.1 percent in the previous quarter.

A BOK official remained hopeful about Korea’s outlook, saying it could achieve 2.7 percent annual growth this year, as long as the economy does not contract any further.

“By calculation, if fourth-quarter growth exceeds zero percent, we can achieve our projection of 2.7 percent annual growth. If it exceeds 0.3 percent, we can even hit the government’s target of 2.8 percent growth,” said BOK’s economic statistics department director Chung Kyu-il.

The BOK projects 2.8 percent growth next year, citing better global trade environment and a recovery in oil prices, while private think tanks forecast 2.2-2.5 percent growth.

Lee Geun-tae, a senior researcher at LG Economic Research Institute, said the weakened role of the US in sustaining global growth will lead to slower growth worldwide, which is bad news for South Korea. LGERI projects 2.2 percent growth next year.

“Now, the US is showing almost full employment, but there have been repeated patterns that it will suffer a steep decline in growth after showing nearly full employment,” Lee said.

“With China and EU also likely to slow, Korea faces difficult external conditions,” he said.

Lee added that construction-led growth will not last long and that supplies of new apartments have surged excessively, adding to worries about oversupply.

By Kim Yoon-mi (yoonmi@heraldcorp.com)