South Korea's economy grew slower than expected in April-June, data showed, as Europe's debt crisis hit exports and consumption cooled, putting pressure on the central bank to cut rates again.
Gross domestic product increased just 0.4 percent quarter on quarter, compared with 0.9 percent in the January-March period, according to central bank figures, released on Thursday.
From the previous year the export-dominated economy expanded 2.4 percent, a slowdown from 2.8 percent in the first quarter and the weakest pace since a 1.0 percent rise in July-September 2009.
"Growth in private consumption slowed, while exports and facilities investment swung to negative growth," the Bank of Korea (BOK) said.
The second-quarter performance was below its initial estimate early this month and also lagged market expectations.
The central bank and economists surveyed by Dow Jones Newswires had forecast a 0.5 percent quarter-on-quarter expansion, and 2.6 percent year-on-year.
The bank was expected to face calls for another rate cut as early as next month, after a surprise reduction of 25 basis points on July 12.
Its governor Kim Choong-Soo on Wednesday had stressed growing downside risks to the bank's 2012 growth forecast of 3.0 percent. That prediction had been reduced from 3.5 percent just two weeks ago.
The central bank said exports fell 0.6 percent quarter-on-quarter in April-June after growing three percent in the previous three months.
Private spending grew just 0.5 percent, slowing from 1 percent growth in the preceding quarter.
Facility investment shrank 6.4 percent after growing 10.3 percent in the first quarter. Construction investment grew 0.3 percent after falling 1.2 percent in the previous quarter.
"The world economy, as well as our own, is moving on an unpaved road, and the Korean economy has hit a pothole in the second quarter on the way to long-term growth," Kim Young-Bae, director-general of the BOK's economic statistics division, said at a media briefing.
"But I expect conditions to improve for the rest of this year," he added, according to Dow Jones Newswires.
Analysts, however, said Asia's fourth largest economy is likely to grow in the two percent range this year unless Europe can end its protracted debt crisis.
"Unless the eurozone situation turns better, there is a high chance that the local economy will likely grow below three percent this year due to weaker exports and sluggish domestic demand," Lee Sang-Jae of Hyundai Securities told Yonhap.
"The BOK will likely cut the key rate one more time and a potential third rate reduction will depend on how external conditions develop."