Roundup: S.Korea's Q4 growth slows on ebbing construction

South Korea's economic growth in the fourth quarter slowed down after peaking to a five-year high as the construction sector faltered on slump in home transactions and lower government spending on infrastructure in the final quarter of last year, central bank data showed Tuesday.

Real gross domestic product (GDP) rose 0.6 percent during the October-December period from the previous three months, according to the Bank of Korea (BOK). It halved from a 1.3 percent growth in the third quarter, which was the highest figure since the second quarter of 2010.

From a year ago, the fourth-quarter GDP increased 3 percent.

Private consumption expanded at a faster pace in the fourth quarter than the previous quarter, while exports rose after falling in the third quarter, contributing to growth of the export-driven economy.

Construction investment, however, plunged 6.1 percent for the three-month period to Dec. 31 after increasing 5.0 percent in the third quarter. Investment in the construction industry advanced 7.4 percent in the first quarter and 1.6 percent in the second quarter each.

"Construction investment, which had shown positive pictures for the first three quarters of last year, fell sharply in the fourth quarter due to slowing housing market and shrinkage in social overhead spending (SOC)," Jeon Seung-Cheol, director general of the BOK's economic statistics department, told a press conference.

According to the land and transport ministry's data, South Korea's housing transactions amounted to 1.19 million in 2015, up 19 percent from a year earlier. It was higher than 18 percent in 2014 and 16 percent in 2013 each.

In December alone, the home transactions declined 10 percent compared with the previous month, indicating the housing market turning downward toward the end of 2015 amid tighter lending rules to curb massive household debts.

The social overhead spending (SOC) also declined toward the end of last year as the government frontloaded its budgets, including those on infrastructure in the first half to restore growth momentum in an early stage.

Private consumption growth accelerated from 1.2 percent in the third quarter to 1.5 percent in the fourth quarter on a quarterly basis as the government's consumption promotion events, called Korea Black Friday, shored up car sales and revenue in the retail and wholesale sector.

Despite external uncertainties like China's slowdown and low crude oil prices, South Korea's exports expanded 2.1 percent on strong demand for handsets and chemical products after falling 0.6 percent in the third quarter.

For the whole year of 2015, the real GDP rose 2.6 percent, posting the lowest in three years. It was lower than 3.3 percent in 2014 and 2.9 percent in 2013 each.

The 2015 figure reflected concerns that the economy's growth potential declined below 3 percent amid structural factors looming such as aging population, household debts and the survival of loss-making companies by help of state funds.

The BOK expected South Korea's growth to rebound to 3 percent in 2016, but downside risks facing the economy remained such as China's slowdown, sinking crude prices, emerging economies' uncertainty and the expected rate hike in the United States.

Exports, which the economy rely on for about half of its growth, rose 0.4 percent in 2015, down 2.4 percentage points from the previous year. It marked the lowest growth since 2009 when the global financial crisis peaked.

Private consumption grew 2.1 percent in 2015, higher than 1.8 percent a year earlier as the government unveiled a stimulus package, including consumption tax cuts, the Korea Black Friday promotion events and an extra budget, to overcome consumption plunge from the Middle East Respiratory Syndrome (MERS) outbreak in late May.

A growth in government spending accelerated from 2.8 percent in 2014 to 3.3 percent in 2015, with construction investment growth picking up from 1.0 percent to 4.0 percent in the same period. Endit