SEOUL–South Korea’s economy expanded at a much slower pace in the second quarter of this year than the first, as widely expected, with a viral outbreak hurting tourism and private consumption at a time when exports remained sluggish.
Gross domestic product rose a seasonally adjusted 0.3% in the April-June period from a quarter earlier, slowing from a 0.8% gain in the previous quarter, according to preliminary data released Thursday by the Bank of Korea.
On a year-over-year basis, the economy grew 2.2% in the second quarter following a revised 2.5% gain in the first.
The second-quarter results compare with market expectations for the economy to grow 0.4% from the previous quarter and 2.2% from the previous year.
The latest data showed private consumption fell 0.3% from the prior quarter in the April-June period, a turnaround from a 0.6% gain in the first quarter. Exports–accounting for half of the country’s growth–edged up 0.1% in the second quarter, unchanged from the first.
The BOK earlier this month lowered its growth forecast to 2.8% for 2015 from an earlier estimate of 3.1%, partly due to the impact of an outbreak of Middle East Respiratory Syndrome on the economy. MERS has killed at least 36 Koreans since its outbreak in May and as kept shoppers and tourists at home, exacerbating the effects of an export slump. Outbound shipments fell for a sixth straight month in June.
The central bank in June slashed the policy rate for a second time this year to a record-low 1.50% to spur anemic growth. In tandem, the government in July proposed a 22 trillion won ($19 billion) fiscal stimulus plan, including a 12-trillion-won extra budget.
Policy makers in Seoul expect the stimulus to help the economy pick up again, beginning the second half of 2015. The BOK expects Korea’s annual growth rate to accelerate to 3.3% in 2016.
South Korea’s economy expanded 3.3% in 2014 following 2.9% growth the previous year.