July 25, 2014 12:24
The economy was hit by declining private consumption in the second quarter as people refrained from spending after the April 16 ferry disaster.
The Bank of Korea on Thursday said the economy grew just 0.6 percent from April to June, the lowest growth since the third quarter of 2012. This has led to forecasts that annual GDP growth could fall to around 2.4 percent.
Slowed private spending was the main culprit. Private consumption fell 0.3 percent in the second quarter compared to the previous three months, and wholesalers and retailers, restaurants and hospitality businesses shrank 0.1 percent for the first time since 2008.
As Koreans mourned the death of hundreds of teenagers and other victims of the ferry disaster, spending on dining, shopping and other convivial activities declined.
The slowdown in private consumption has spawned concerns of prolonged zero-percent growth. The government spent W17.3 trillion last year to pump-prime the economy, which led to 1.1 percent growth in the third quarter of 2013. But the results proved short lived.
Chung Young-taek at the BOK said, "Whether the economy recovers in the third quarter depends on how much impact the ferry disaster will have on private spending during the summer holidays."
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