By Arsh Tushar Mogre and Devayani Sathyan

BENGALURU (Reuters), South Korea’s first quarter economic growth was likely to be slowed by COVID-19 restrictions that slowed down consumer spending.

The fourth-largest Asian economy, Asia, is forecast to grow by 0.6% seasonally in January-March, compared to the prior three-months, according to the median forecast. It had previously grown 1.2% in Oct-December.

Year-on-year, GDP grew by 2.8% in the initial quarter according to the median forecast from 18 economists. That is down sharply from the 4.2% pace recorded in the fourth quarter. On April 25, the data will be made public.

Rhee, Chang-yong (Bank of Korea) warned that growth will slow further and the economy might experience long-term stagnation as a result of an aging population, lower productivity, and a slower pace of economic development.

“Due to rapid spread COVID-19 in Q1, private consumption will be lower than expected at this time,” stated Kyu-yeon Chun (an economist at Hana Financial Investment) in Seoul.

“Growth momentum in the external sector will also be affected by falling trade surpluses due to increasing raw material prices.”

South Korea was a significant importer and exporter of energy as well as raw materials needed for manufacturing semiconductor chips. Russia’s conflict with Ukraine is expected to cause a greater risk of production disruptions.

This, combined with decade-high inflation in South Korea and a slower Chinese economy (the country’s largest trading partner) meant that the South Korean economy would lose momentum this and next year due to waning stimulus related to the pandemic. [ECILT/CN]

According to a separate Reuters poll, growth is expected to average 2.8% for this year and 2.6% in the future. [KR/INT]

Lloyd Chan (senior economist at Oxford Economics) stated that “the near-term outlook for growth will remain difficult, as higher commodity prices raise inflation and put down pressure on domestic consumption.”

In a surprising move, Bank of Korea (BOK), raised its benchmark rate last week to combat high inflation. This could threaten its economic recovery.

South Korea’s central banks said that earlier in the month, the economy would slow down than it predicted for February at 3.0%.

Tuesday’s announcement by the International Monetary Fund saw a reduction of 2.5% in its projections for growth, down from 3.0%. It also upgraded its inflation projections from 3.1% to 4.0%.