South Korean Economy Slows Down

The third-quarter growth of the South Korean economy came in below expectations, the Bank of Korea's advance estimates revealed on Thursday.

What Happened

South Korea, the fourth-largest economy in Asia, saw its gross domestic product grow by 0.4% in the July to September quarter. A poll of 26 economists by Reuters had predicted a 0.5% growth of the quarter.

The latest quarterly GDP growth is lower than the 1.1% that the Korean central bank announced for the second quarter.

Breaking things down, exports out of the eastern Asian country grew by 4.1%, turning around two consecutive quarters of contractions.

Private consumption, which accounts for nearly half of South Korean GDP, rose by 0.1%, a significantly weaker number than the 0.7% gain in the second quarter. First-quarter private consumption in the country had also grown by 0.1%. Korea's private consumption grew by 0.6% in the third quarter of 2018.

Construction spending dropped 5.2% in the July to September quarter, compared to a drop of 6.4% in the same quarter of 2018. 

What’s Next

Economists argue that while Korean export is rebounding, the country’s economy, in general, would benefit from more clear policy support. Export was the most significant growth driver for the country's economy in the second quarter. 

Oh Chang-sob, an economist at Hyundai Motor Securities (KRX: 005380), particularly calls for further interest rate cuts to boost the worsening private spending, according to the CNBC report.

The Bank of Korea has cut its policy interest rate twice in the last three months. The most recent cut came last week.

South Korean stocks, as indicated by the Korea Composite Stock Price Index (KOSPI), were down 0.27% as of 12:12 p.m. Seoul time.