The South Korean economy grew less than 1 percent for the past three consecutive quarters, raising the possibility of the government failing to reach its annual growth target.

According to the Bank of Korea on Friday, Korea’s gross domestic product expanded 0.6 percent on-quarter in the third quarter of 2016. 

The revised figure was lower than the 0.7 percent growth preliminary estimated by the BOK in October. 

Since the fourth quarter of 2015, the quarterly growth has been hovering below 1 percent, adding to worries that the Korean economy could be mired in a prolonged slowdown.

The sluggish Q3 growth is largely attributable to flat growth in private consumption and facility investments, the two pillars of the domestic economy.

Private consumption rose 0.5 percent, which halved from the previous quarter, the BOK while facility investments inched up 0.2 percent, far lower than 2.8 percent three months earlier, the BOK data showed.

The country’s flagship manufacturing industry slumped 0.9 percent during the same period, largely due to the Samsung Electronics’ Galaxy Note 7 debacle and labor strikes by local carmakers’ unionized workers.  

Amid the worsening conditions of global trade, the nation‘s gross national income also shrank 0.4 percent in the third quarter from the previous one, the BOK said.

It is the first time that the country’s GNI dropped for two quarters in a row since the 2008 US-triggered financial crisis, according to the data.

A further contraction in the private consumption sector is likely to follow in the next quarter, considering the impact of the ongoing corporate restructuring activities.

While the nation’s unemployment rate hit an 11-year-high in October, as many in the shipbuilding and shipping industries lost their jobs, consumer prices grew 1.3 percent in November, raising concerns about stagflation. 

As a result, the composite consumer sentiment index by the BOK slid to a 7-year-low of 95.8 last month since April 2009.

Adding to the concerns, economic experts have an even more dire outlook for the fourth quarter.

“First of all, low oil prices -- one of factors that had been helping boost consumption slightly -- are expected to rebound as the Organization of the Petroleum Exporting Countries members reached an agreement to cut production, so it would have negative impact on private consumption as it weighs on sentiment,” said Kang Joon-koo, an economist at LG Economic Research Institute.

“Another factor is that the construction industry that had contributed to the growth more than other sectors would undergo a slump, becoming not that significant to keeping the growth up,” he added.

Implementation of the Kim Young-ran anti-corruption law in late September and the recent political scandal involving President Park Geun-hye and her confidante Choi Soon-sil, will for sure undermine willingness to spend, Kang said.

The BOK maintains its previous growth goal for this year at 2.7 percent based on expectations that the economy would do better in the final quarter.

“The Korean economy will be able to achieve the 2.7 percent growth goal for this year if only it 0.1-0.4 percent in the fourth quarter,” said Kim Young-tae, head of the BOK’s national account division. 

However, these comments are slightly different from what the central bank previous said, that ensured attainment of the yearly goal even with a zero percent growth in the Q4.

International and local economic institutions have cut their growth forecasts for the Korean economy next year, considering the recent progress.

The Organization for Economic Cooperation and Development cut its 2017 growth forecast for Korea from 3 percent 2.6 percent last week.   

LG Economic Research Institute and Korea Economic Research Institute suggests 2.2 percent for next year.

By Song Su-hyun (song@heraldcorp.com)