SEOUL, Oct. 26 (Xinhua) -- Economic growth in South Korea slowed to the lowest level in around three years in the third quarter, but it was expected to rebound in the next quarter given signs of recovery such as the expected inventory restocking, export growth and the end of labor strikes at major automakers, experts said Friday.
Real gross domestic product (GDP), the broadest measure of economic performance, grew 0.2 percent in the third quarter from three months before, according to the Bank of Korea (BOK). The figure marked the lowest since the fourth quarter of 2009 when it recorded the identical growth rate.
Consumption, exports and construction investment actually improved in the third quarter from the previous quarter, but business investment and inventories dragged down the third-quarter GDP. It indicated that local firms remained reluctant to spend capital in expanding factories amid lingering uncertainties such as European fiscal crisis and the potential U.S. fiscal cliff.
Experts, however, forecast that the South Korean economy may have bottomed in the third quarter, saying that inventory restocking, export rebound and the end of labor strikes at key automakers would boost production in the fourth quarter. "We expect GDP growth to rebound to 0.5 percent in the further quarter on an on-quarter basis, supported by inventory restocking and a modest demand recovery," said Kwon Young-sun, an economist at Nomura in Hong Kong.
Inventory reduced 0.5 percent on-quarter in the third quarter, indicating that the country's GDP growth might have risen further without the inventory adjustment. "The minus growth of inventory has a significant meaning for the future growth. The reduction in inventory means that production has room to grow further in the fourth quarter as it already experience adjustment," Kim Young-bae, director general of the BOK's economic statistics department, told reporters at the press conference after the GDP announcement.
"Domestic demand's contribution to growth weakened during the third quarter as facility investment worsened on worries about the protracted European fiscal crisis and the potential U.S. fiscal cliff," said Yoon Chang-yong, an economist at Shinhan Investment Corp.
Yoon, however, noted that positive signs were detected such as improved private consumption, active inventory adjustment and positive effect from the government's fiscal stimulus, forecasting that the economy will recover at a gradual pace from the fourth quarter of this year.
The possible export rebound and the end of carmakers' labor strikes were picked as another positive factor. "A fourth-quarter rebound is a good possibility. Exports in September showed signs of recovery, which should be evident in industrial production data 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 Alaistair Chan, an economist at Moody's Analytics in Sydney.