2nd-Quarter GDP Growth Falls to 4.8%
By Kim Jae-kyoung
Staff Reporter
The Koran economy grew at its slowest pace in one year in the second quarter, with private spending expansion falling to its worst level in four years due to slackened consumer sentiment caused by high inflation.
The Bank of Korea (BOK) reported Friday that the nation's real gross domestic product (GDP) grew 4.8 percent in the second quarter from a year ago, down sharply from the first quarter's 5.8 percent expansion.
This was the lowest growth rate since the first quarter of 2007. The quarter-on-quarter growth rate stood at 0.8 percent between April and June. GDP is the total output of goods and services produced in a country in a given period.
The setback in the nation's economic performance was mainly due to sluggish domestic demand caused by a decline in private spending and construction investment.
Private consumption contracted 0.1 percent in the second quarter from the previous quarter, the worst performance in four years since it shrank 0.1 percent in the second quarter of 2004. Construction investment also fell 0.6 percent during the same period.
``The growth of the economy is slowing, with domestic demand expansion losing steam,'' Choi Chun-sin, director of the BOK's economic statistics department, told reporters.
``Consumer sentiment has been deteriorating due to unfavorable factors both at home and abroad, such as the global economic downturn, rising inflation and high-flying oil costs,'' he added. ``These factors have combined to dampen private spending and corporate investment.''
Exports of goods increased 3.7 percent in the second quarter from the first quarter, the sole growth engine for the world's 13th largest economy. It was a turnaround from the first quarter's 1.8 percent contraction.
Despite the solid performance of exports, economic growth is expected to go downhill further in the latter half, due to high inflation triggered by soaring international oil prices.
In its latest report, Hana Institute of Finance forecast that GDP growth will fall to 3.7 percent in the latter half from the first quarter's 5.3 percent expansion, citing high-flying oil costs.
``The economic slowdown will continue through the first half of next year and a drastic turnaround is unlikely,'' the report said.
``The government should focus on controlling inflation expectations and aftereffects of high oil prices. At the same time, it should beef up monitoring of household debts and the property market,'' it added.
Appearing on a local radio show, Vice Strategy and Finance Minister Kim Dong-soo said that consumer price inflation may rise to the upper 5 percent level in the latter half.
``The government has placed a top policy priority on price stabilization, and we are preparing a preemptive countermeasure system for that,'' he said.
Consumer price inflation hit a 10 year high of 5.5 percent in June, due to skyrocketing oil prices.
In early July, the central bank forecast that the economic growth will slow to 3.9 percent in the second half while inflation is forecast to jump 5.2 percent on rising oil costs.