South Korea growth hits six year low in fourth quarter

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Seoul, South KoreaImage source, AFP
Image caption,
South Korea's economy slowed in the last three months of 2014, compared to the previous quarter

Growth in Asia's fourth largest economy, South Korea, fell to a six year low in the fourth quarter of last year.

The economy grew a seasonally adjusted 0.4% in the October to December period from the previous quarter when growth hit 0.9%.

Fourth quarter growth of 2.7% from a year ago also missed market forecasts.

Economists said a slump in infrastructure spending and exports had a big impact on the country's growth.

Construction investment fell by a seasonally adjusted 9.2%, the worst since 1998 as weaker tax revenue led the government to cut back spending on projects.

Barclays economist Wai Ho Leong said that annual growth of 3.3% in 2014 had fallen below the bank's forecast of 3.5%.

"[Growth will] remain soft in the first quarter of 2015 before reaccelerating from the second quarter as the pass-through of lower oil prices rekindles global external demand," he said in a note.

Rate cut ahead?

The disappointing data could lead the country's central bank to cut interest rates again to boost the economy, according to economists.

The Bank of Korea has cut the interest rate in three steps since the current easing cycle began in May 2013.

The most recent move came in October when it cut the base rate to a record low of 2%.

However, last week the central bank did cut its growth forecast for this year to 3.4% from an earlier forecast of 3.9%, anticipating the slowdown in the economy.

The central bank is set to meet on 17 February.