The national economy posted growth of less than 1 percent for five consecutive quarters amid the protracted slump in local consumption and weaker exports. Since peaking at 1.1 percent in the first quarter of 2014, quarter-to-quarter growth has stayed below 1 percent ― 0.5 percent in Q2, 0.8 percent in Q3, 0.3 percent in Q4, and 0.8 percent in the first quarter of 2015.
In particular, the second quarter marked the weakest quarter growth in six years since the 0.1 percent in the first quarter of 2009, which was affected by the global financial crisis.
This time, the recent Middle East Respiratory Syndrome (MERS) scare undermined consumer sentiment, contributing greatly to pulling down the growth to 0.3 percent in the second quarter. Private consumption dropped 0.3 percent. The drought also plunged 11.1 percent from the first quarter.
The lower-than-expected growth is raising concerns that it may miss the Bank of Korea’s latest yearly growth forecast of 2.8 percent, leading the nation’s economy to face a longer-than-expected low-growth period.
The central bank, which cut the benchmark interest rate to a record low of 1.5 percent in June, has revised its outlook on year-on-year GDP growth from the earlier 3.1 percent to 2.8 percent. The central bank has cut its key rate four times since August last year to support growth.
The government also announced its fiscal stimulus plan to arrange 22 trillion won (US$19 billion) this month.
Analysts say that slow growth, despite massive pumping measures by the government, means that the nation is stuck in a low growth trap.