SEOUL–South Korea’s central bank confirmed Tuesday that the country’s economy grew just 2 percent last year — the slowest rate for three years — on weak export growth and consumer demand. The growth figure was in line with the Bank of Korea’s (BOK) preliminary estimate made in January. Exports, which account for 50 percent of GDP, grew 4.2 percent in 2012, down from 9.1-percent growth the year before, hit by sagging demand from major markets including China and Europe.
“Private consumption slowed, while investments on construction and corporate infrastructures shrank,” the central bank said in a statement. South Korea, with an export-led economy, tends to mirror the fortunes of the region, and its GDP numbers are often a harbinger of broader trends in Asia. Korean exporters say they are being hurt by the weakness of the yen, which is giving Japanese products a strong competitive edge in the key electronic and auto markets. Private consumption grew 1.7 percent in 2012, slower than 2.4 percent a year earlier. Investment on construction shrank 2.2 percent after falling 4.7 percent in 2011, while investment on corporate infrastructure was also down 1.9 percent from the previous year. The government is poised to unveil a package of stimulus measures, which may include 10 trillion won (US$9 billion) in extra budget plans, in a bid to prop up growth. The central bank recently slashed its forecast for economic growth for this year to 2.8 percent from 3.2 percent estimated last October. The economy has shown signs of picking up since the third quarter of last year, but analysts say slowing manufacturing activity in recent months suggests weak underlying conditions. With inflation running at just 1.4 percent — well below the BOK’s target range of 2.5 to 3.5 percent — the bank is expected to consider an interest rate cut by the end of the second quarter if the economy is still struggling.