South Korea's economy slowed for a second consecutive quarter in the July-September period and economists said softening global demand would keep holding back Asia's fourth-largest economy for a while. The central bank has pledged to continue its drive to unwind the sharp interest rate cuts delivered during the 2008-2009 global crisis but economists said chances of additional rate increases were growing slimmer.
Gross domestic product grew a seasonally adjusted 0.7 percent in the July-September period from the second quarter after a 0.9 percent rise in the April-June period, the Bank of Korea's advance estimate showed, roughly matching market expectations. "(GDP numbers) will probably be bad in Q4 as well. For now, the crisis in Europe hasn't affected export numbers badly, but growth numbers can still fall well into Q1 of 2012." said Jun Min-kyoo, economist at Korea Investment and Securities.
The median forecast from a Reuters survey was for Asia's fourth-largest economy to expand by a seasonally adjusted 0.6 percent in the third quarter. The data failed to impact financial markets as investors kept their eyes on progress in the euro zone's effort to address its fiscal crisis. Capital investment shrank by a seasonally adjusted 0.4 percent in the third quarter, turning around after a strong 3.9 percent gain in the second quarter, underscoring lacklustre confidence among companies about the business outlook.
The Bank of Korea vowed as recently as this month to keep pursuing its policy tightening stance as long as the global economy does not slip back into a recession, but investors remain largely sceptical. It raised its policy interest rate by a total of 125 basis points to 3.25 percent in five steps between July last year and June this year but has since left it unchanged in the face of increased global uncertainty.
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