South Korea's economic growth slows to 3.2 percent in 3Q, lowest in more than 1 year

Economic IndicatorsAssociated Press

South Korea's economic growth slowed to 3.2 percent in the third quarter, the lowest in five quarters, as weakness in exports and spending by companies offset the boost from government stimulus.

The Bank of Korea said Friday that Asia's fourth-largest economy slowed from 3.5 percent growth in the April-June quarter.

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On a quarter-to-quarter basis, South Korea's economy grew 0.9 percent, a slight pickup from the second quarter's 0.5 percent growth when the shock from a deadly ferry sinking dented retail sales and consumer spending.

But the economy has expanded less than 1 percent on quarterly basis for four straight quarters, showing the recovery is still weak.

Capital expenditure contracted 0.8 percent from the previous quarter and exports turned negative while government spending contributed significantly to third quarter growth. Consumer spending rebounded after the April ferry sinking.

South Korea's finance ministry said in July that it would spend an additional $11.4 billion over the rest of the year and set up another $27.4 billion stimulus to support small- and medium-sized companies through loans and financial support.

The ministry eased mortgage rules to boost the real estate market, hoping a rise in property prices would lead to increase domestic demand.

The central bank joined the government's stimulus efforts by lowering its benchmark interest rate twice this year. It is now at a record low of 2 percent. It also downgraded its growth forecast for this year and next citing a weak recovery in capital expenditure.