SEOUL: South Korea’s economy shrank 0.3 percent in the first quarter, its worst performance for a decade, its central bank said, as exports fell and companies cut investment amid the US-China trade dispute.
It was the largest contraction for Asia’s fourth-biggest economy since a 3.3-percent drop in late 2008 at the height of the global financial crisis.
The trade-dependent country last posted negative growth – of minus 0.2 percent – in October-December 2017.
Falling exports and capital investment have put a dent in the economy despite increased government and consumer spending, the central Bank of Korea said in a statement.
Exports shrank 2.6 percent quarter-on-quarter, a sharp contrast from a year earlier when they rose 4.4 percent, riding on solid demand for memory chips – a key South Korean product.
Infrastructure investment dropped 10.8 percent over the same period, the largest contraction since a 24.8-percent reduction in early 1998 when the country received a $58-billion bailout package from the International Monetary Fund.
President Moon Jae-in’s government on Wednesday approved a $5.8-billion supplementary budget to boost exports and address air pollution.
The disappointing figures came after the central bank lowered its growth outlook by 0.1 percentage points to 2.5 percent earlier this month, citing sluggish global demand for memory chips and “intensifying trade disputes” worldwide.
South Korea’s GDP grew 2.7 percent in 2018, the weakest pace in six years.