Korea’s GDP adds 0.4% in Q4

The nation’s economic growth rate in the fourth quarter of last year fell to the lowest level in nine quarters due to sluggish export and falling tax revenue. With consumer sentiment poised to weaken as tax refunds, which are paid in the early days every year, will decline this year from last year, watchers say that the timing of actual economic recovery will be delayed further.

According to the Bank of Korea on Friday, the real GDP in the fourth quarter of last year has grown only 0.4 percent from the previous quarter. This quarterly growth is the lowest in two years and three months since the third quarter of 2012 when the rate was recorded at 0.4 percent. The quarterly growth had been generally maintained at around 1 percent level for one and a half years from the second quarter of 2013, but it slumped again to a point of less than half that level this time.

“The rate declined mainly because export slumped with shipment of goods falling for two consecutive quarters, and the government reduced construction investment amid a drop in tax revenue,” said Jeong Yeong-taek, head of the central bank’s economic statistics bureau.

As the growth rate in the fourth quarter of last year significantly weakened, last year’s annual economic growth rate only stood at 3.3 percent. The rate thus fell to below the 4 percent level for four consecutive years since 2011. Analysts say that slumping private sector consumption after the Sewol ferry disaster and constantly lackluster corporate investment are the main reason the Korean economy posted a low growth rate anew.

It is uncertain whether the economy will rebound in the first quarter of this year or not. Experts originally predicted that the quarterly growth would return to the 1 percent level due to base effect from the slump in late last year, but the "fiasco of tax return" for last year could help curb rebound. “If household income declines in proportion to the reduction of tax refunds, it could effectively lower the nation’s economic growth rate by 0.1 – 0.3 percentage point,” said Lee Geun-tae, a senior researcher at the LG Economic Research Institute.

In fact, the distribution industry is witnessing such concern gradually turning into a reality. The overall sales of the retail chain Homeplus from Thursday last week to Thursday this week fell 18.7 percent, when compared to the same period of last year. Analysts say that this trend may stem from slumping consumer sentiment among salaried employees who are forced to pay more taxes owing to a revised tax return method for last year.