South Korea sees growth slowing

Source: Agencies  |   2008-10-25  |     NEWSPAPER EDITION

SOUTH Korea's economic growth has slowed in the third quarter to its lowest level in three years as construction contracted and a global slowdown hit manufacturing and exports.

The Bank of Korea, the country's central bank, said yesterday that gross domestic product grew 3.9 percent in the three months through September compared with the same period a year earlier, its worst performance since Asia's fourth-largest economy expanded 3.4 percent in the second quarter of 2005.

South Korea reported growth of 4.8 percent in the second quarter.

The slowdown comes as an unfolding global financial crisis sends shock waves through world markets and threatens to drag major economies into recession.

South Korea's stock market and currency have slumped, and the government and central bank have been forced to shore up the banking system and construction sector.

"Everything is bad," Citibank Korea economist Oh Suk-tae said of the numbers. "The weakness in exports and the manufacturing sector clearly shows the impact of the global economic slowdown."

Manufacturing and export growth slowed "mainly due to the sluggishness in cars, semiconductors and computers," the bank said in a statement. Growth in the services sector also weakened.

The central bank said the economy expanded 0.6 percent in the third quarter from the second, the weakest since it grew 0.5 percent in the third quarter of 2004. The economy expanded 0.8 percent in the second quarter of this year.

Oh said the third quarter's 0.6 percent figure equated to an expansion of 2.3 percent at an annual pace. The Bank of Korea does not release an annualized figure.

Compared with the same period last year, exports of goods slowed to 8.1 percent growth in the third quarter from the second quarter's 12.5 percent, the bank said. Exports, however, contracted 1.8 percent when compared with the previous quarter.

Construction contracted 0.3 percent from the year before. The component grew quarter on quarter, though the bank attributed the increase to a technical factor.

South Korea's benchmark stock index extended losses, falling 8.5 percent to 960.08 less than one hour before the market closed yesterday and trading below 1,000 points for the first time since June 2005. The Korea Composite Stock Price Index has fallen 49.4 percent so far this year.

On Sunday, South Korea announced a US$130-billion plan to shore up the nation's financial system, including a three-year guarantee for offshore loans domestic banks take out between Monday and the end of June, 2009. The plan will also use some of Seoul's currency reserves to pump more money into the banking system.