SEOUL: South Korea’s economy grew at its slowest pace in more than a year in the final quarter of 2016, its central bank said Wednesday, rattled by a scandal engulfing impeached President Park Geun-Hye.
The Bank of Korea (BOK) said in a statement that gross domestic product expanded 0.4 percent during the October to December period, compared to the previous three months when it grew 0.6 percent.
“It is hard to say the overall picture is positive,” said Chung Kyu-Il, a director at the BOK. Annual growth for Asia’s fourth-largest economy in 2016 was 2.7 percent, in line with the bank’s projection.
“Weakened private consumption, which accounts for around half of the GDP, is most to blame,” he said.
The political turmoil that erupted in October has brought huge numbers onto South Korea’s streets for weekly protests to demand Park’s immediate departure from office.
The scandal centres on Park’s secret confidante Choi Soon-Sil, who is accused of using her ties with the president to extract money from conglomerates such as Samsung and meddle in state affairs.
Analysts say the scandal has hampered consumer sentiment with domestic demand expanding just 0.2 percent in the fourth quarter of 2016 compared to 0.5 percent growth posted in the previous three months.
Domestic political uncertainty and weakening consumer sentiment seem to have acted as a drag on domestic demand, Woo Jae-Joon, an economist for Bank of America Merrill Lynch told Bloomberg.
Kim Doo-Un, an economist for Hana Financial Investment, added: “I expect 2.4 percent expansion for 2017, and an extra budget and rate cut could be deployed within the first half.”
Earlier this month, the central bank revised down its growth projection for 2017 to 2.5 percent citing “deteriorations in economic sentiment” and kept its key interest rate at a record-low for the seventh consecutive month.