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The Korean economy grew at its slowest pace in 10 years due to a continued fall in investment and exports, central bank data showed Tuesday.
The Bank of Korea (BOK) said the country's gross domestic product (GDP) contracted 0.4 percent in the first quarter of 2019 from a quarter earlier, a major setback from the previous quarter's 0.9 percent expansion.
The figure was also down 0.01 percentage points from the preliminary estimate of 0.3 percent contraction released in April.
The worse-than-expected performance resulted from sluggish exports and reduced investment amid worsening business conditions following anti-business polices such as rapid minimum wage hikes.
Exports of key items, such as semiconductors, were hit hard by the escalating U.S.-China trade dispute.
"The volume of chip sales has bounced back a little, but its unit costs are undergoing adjustments," Park Yang-su, BOK Economic Statistics Department director general, said at a press briefing.
Facilities investment declined 9.1 percent in the first quarter from a quarter before, the worst performance in 41 quarters, while construction investment fell by 0.8 percent.
Exports contracted 3.2 percent, the worst performance in five quarters, due to decreases in external shipments of electrical and electronic equipment including semiconductors.
"The ongoing trade feud will continue to bog down the economy, with the Chinese economy facing a slowdown considered a major factor at play," Park said.
For the country to grow at 2.5 percent in 2019, in line with a revised projection made by the bank's statistics department in January, the remaining three quarters would have to grow at least 0.9 percent.
The central bank has dismissed concerns that Asia's fourth-largest economy is slipping into recession.
"The country had a similar experience in 2006 when the chip cost plunged and the oil price soared, but we did not view it a recession then," Park said.
"So it is difficult to say the economy is entering a recession, although overall economic conditions are deteriorating. It is true, however, that consumer sentiment may be negatively affected."
With a major setback in GDP, the nation's real gross national income decreased 0.3 percent between January and March from a quarter ago
What is of more concern is that the situation is likely to worsen, according to economic experts.
Sung Tae-yoon, an economist at Yonsei University, said economic conditions will continue to worsen unless the government modifies the "income-led" growth policy, including the minimum wage hike.
"Economic conditions will continue to take a turn for the worse, primarily due to reduced investment," Sung said. "No businesses will dare make investment in the current environment where they feel they are being punished due to heavy regulations."
Meanwhile, the figures came amid a growing sense of the economic outlook becoming bleaker.
According to a report published by the Korea Economic Research Institute (KERI), supervised by the Federation of Korean Industries (FKI), Korea will grow 2.2 percent in 2019.
This revised down the previous figure by 0.2 percentage points from three months earlier.
Similarly, the Korea Development Institute and the Organization for Economic Cooperation and Development (OECD) all lowered the growth projection to 2.4 percent from the previous 2.6 percent.
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