S. Korea Q4 GDP growth seen slowing to 2-year low on sluggish consumption

SEOUL: South Korea's economy was expected to grow at its slowest rate in two years in the final quarter of 2016, a Reuters poll found on Monday, as weak consumption and investment dragged on economic recovery.

The economy was expected to have expanded 0.3% in sequential terms, the poll found, compared to a 0.6% rise in the third quarter.

A 0.3% rise would be the slowest since the fourth quarter of 2014, when quarterly economic growth was 0.3%.

On-year, gross domestic product likely grew 2.2% in the fourth quarter. From July to September, it rose 2.6% on a yearly basis.

"Construction probably propped up growth in the fourth quarter, but capital investment likely extended falls. Private consumption growth was slower than the third quarter," said Park Ok-hee, an economist at IBK Securities.

Economists pointed to political uncertainties stemming from an influence-peddling scandal involving President Park Geun-hye as a major factor that dimmed consumption.

Consumer sentiment in December fell to the worst level in more than 7-1/2 years, a central bank survey showed last month, as confidence weakened on the political scandal.

Companies in South Korea have been pushing back their plans for investment and hiring while Park has been stripped of her powers as the Constitutional Court reviews a parliamentary vote to impeach her.

A presidential election will be automatically triggered if the court upholds the impeachment and South Koreans will vote on a new president within 60 days of the court's decision.

"Political issues will likely remain the focus in the first half of 2017, which would continue to weigh on public sentiment and drag the implementation of government policies," said Ma Tie-ying, an economist at DBS Bank. "Given the prospect of an early election, GDP growth would regain momentum in the second half along with sentiment recovery and policies getting back on track." 

Meanwhile, exports were seen likely to pick up modestly in the fourth quarter and contributed to growth as global commodity prices continued to rise, the Reuters poll showed.

The Bank of Korea, which has said fourth quarter growth managed a modest rise, will publish the preliminary growth figures on Wednesday. - Reuters