25 October 2012 Last updated at 21:48 ET
With presidential elections in December, the spotlight is on how to spur growth
South Korea’s economy grew at its slowest pace in nearly three years as the global slowdown hurt demand for its exports and firms cut their investment.
The economy grew at an annual rate of 1.6% in the July to September quarter. That is down from 2.3% in the previous quarter.
Compared with the previous three months, the economy expanded by 0.2%.
South Korea has cut interest rates to spur growth and the weak data may prompt it to take further measures.
Im No-Jung, chief economist at IM Investment and Securities, said the central bank may lower its rates further in the coming months as “the recent series of rate cuts have not had a profound effect on boosting the economy”.
The Bank of Korea, cut interest rates twice in the past four months. The latest of those cuts, announced earlier this month, saw the key lending rate lowered to 2.75% from 3%.
Economic boost?
Recent stimulus measures announced by the Korean government will… kick in during the fourth quarter”
End Quote Lee Chul-Hee Tong Yang Securities
South Korea’s exports, which account for nearly half its economic output, have been hurt by a slowdown in key markets such as the US and eurozone.
Meanwhile, policymakers have found it difficult to boost domestic consumption enough to offset the decline in foreign sales.
As economic conditions in its key markets remain uncertain, South Korea has unveiled a series of measures to try and boost domestic demand.
Last month, it announced a $ 5.2bn (£3.2bn) stimulus package, which included tax breaks on personal incomes and purchases of homes and cars.
Some analysts said that the measures, coupled with the series of interest rate cuts, were likely to have a positive impact on growth in the current quarter.
“Recent stimulus measures announced by the Korean government will… kick in during the fourth quarter,” said Lee Chul-Hee, chief economist at Tong Yang Securities.
He said the economy was expected to show a 0.8% quarter-on-quarter growth in the September to December period.
BBC News – Business
South Korea economic growth slows
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