The South Korean economy expanded at the slowest pace in more than a year in the fourth quarter last year, weighed down by weak private consumption and a slowdown in the construction boom, the central bank said Wednesday.

The nation’s gross domestic product grew 0.4 percent in the fourth quarter from the previous three months, slowing from 0.6 percent quarterly growth in the third quarter. The fourth-quarter figure is the lowest since the 0.4 percent growth in the second quarter of 2014.

For the whole year, the nation’s gross domestic product is estimated to have expanded 2.7 percent in 2016 from a year earlier, matching the Bank of Korea’s previous projection.

Private consumption growth fell on-quarter to 0.2 percent in the fourth quarter from 0.5 percent in the previous quarter, mainly affecting the deceleration of the growth trend, said Chung Kyu-il, director of BOK’s economic statistics department.

“While the scorching heat led consumers to spend much in home appliances like air conditioners in the third quarter, consumption in that area fell in the fourth quarter. As prices of groceries rose, consumption in groceries also shrank,” Chung told reporters in Seoul.



The ongoing political scandal that led to the impeachment of President Park Geun-hye and investigations into conglomerates including Samsung, the anti-graft law that went effect in late September and Samsung’s recall of the Galaxy Note 7 smartphone seem to have affected private consumption adversely as well, although it is almost impossible to gauge the factors as data, said Kim Ji-na, analyst at IBK Investment & Securities.

Construction investment saw a 1.7 percent contraction on quarter in the fourth quarter, falling into the red after three consecutive quarterly growths of 6.8 percent, 3.1 percent and 3.5 percent gain in the first, second and third quarter, respectively.

The slowdown in construction is apparently a result of the government’s tightening rules on mortgage lending to curb rapidly rising household debt amid the BOK’s record low key rate of 1.25 percent.

“With construction decelerated, the economic outlook remains quite gloomy. Aggressive policies including extra budget seems necessary but the authorities lost power to do so due to the political turmoil,” said Sung Tae-yoon, professor of economics at Yonsei University.

“As such, it is difficult to expect a turnaround of the economy for now.”

The BOK recently lowered its 2017 GDP forecast to 2.5 percent from the previous 2.8 percent projection, citing expectations for weaker private consumption.

Late last year, BOK Gov. Lee Ju-yeol had urged the Finance Ministry to use more aggressive expansionary fiscal policy to sustain growth in 2017, citing a low national debt-to-GDP ratio of around 40 percent.

Finance Minister Yoo Il-ho recently said he will review allocating additional budget only after checking later how the economy fairs in the first quarter.

By Kim Yoon-mi (yoonmi@heraldcorp.com)