The South Korean economy grew at the slowest pace in nearly three years in the third quarter in the face of the global economic downturn, the central bank said Friday, giving weight to the bank‘s recent rate cut.

Korea’s gross domestic product, the broadest measure of economic performance, grew 0.2 percent in the July-September period from three months earlier, slowing from a 0.3 percent on-quarter gain tallied in the second quarter, according to an advance estimate by the Bank of Korea.

The third-quarter data marked the slowest growth since a 0.2 percent on-quarter gain in the fourth quarter of 2009.

From a year earlier, Asia’s fourth-largest economy advanced 1.6 percent, slowing from a 2.3 percent on-year gain in the second quarter. It also marked the slowest on-year growth since 1 percent in the third quarter of 2009.

The growth data came as the BOK made this year’s second rate cut to 2.75 percent last week in an effort to prop up the weakening economic growth. The central bank also cut its 2012 and 2013 growth forecast to 2.4 percent and 3.2 percent, respectively.

The central bank earlier said that the quarterly growth was likely to stay below 1 percent every quarter until the first half of next year. It added that the economic growth would underperform its long-term growth trend for a considerable period of time.

“There is some possibility that the full-year growth may hover below the BOK’s 2012 growth estimate,” said Lee Sang-jae, a senior economist at Hyundai Securities Co. “But the quarterly growth is seen as hitting the bottom in the third quarter. Uncertainty surrounding a fiscal cliff in the U.S. would hinder the full-fledged recovery, but the local economy is

expected to be on the moderate recovery trend.”

The Korean economy is losing steam on falling exports and sluggish domestic demand, raising concerns South Korea may be entering a low growth trend.

Exports, which account for about 50 percent out of the GDP, are cooling down, hit by the global economic slowdown and the trend of the local currency’s appreciation.

Korea‘s domestic demand also remains subdued as high household debt curbs consumer spending and companies are delaying making big capital investment due to economic uncertainty.

According to the central bank, exports gained 2.5 percent on-quarter in the second quarter after contracting 0.6 percent three months earlier.

Private spending, one of the main growth engines of the Korean economy, grew 0.6 percent, picking up from 0.4 percent growth in the preceding quarter.
However, there was some optimism for the upcoming fourth quarter.

“A fourth quarter rebound is a good possibility, however. Exports in September showed signs of recovery, which should be evident in industrial production data due next week. A seven-week labor strike at Hyundai ended in early September; this coupled with unexpected spillover gains from recent China-Japan tensions would help the automotive sector,” said Moody’s Analytics, a division of Moody’s Corp., on Oct.26.

It also said in a report that, “facility investment contracted 4.3 percent after falling 7 percent in the second quarter, and construction investment grew 0.2 percent, a turnaround from a 0.4 percent decline in the previous quarter.”

From news reports