SEOUL (REUTERS) - South Korea’s economic growth nearly halved in the first quarter from the preceding three months on Covid-19 curbs and surging inflation, while a slowing Chinese economy clouded the outlook for the coming months.

Gross domestic product grew a seasonally adjusted 0.7 per cent in the first quarter from the last quarter of 2021, preliminary data from the Bank of Korea (BOK) showed on Tuesday (April 26), slowing from 1.2 per cent a quarter earlier, but just beating 0.6 per cent growth seen in a Reuters survey.

“Domestic consumption will rebound as domestic Covid-19 curbs were mostly lifted, but China’s slowdown will severely hit exports and the overall economy in the current quarter,” said HI Investment & Securities economist Park Sang-hyun.

The data comes as a senior International Monetary Fund (IMF) official warned on Tuesday that Asia faces a “stagflationary” outlook, with likely downgrades to growth projections and surging price pressures.

Private consumption shrank 0.5 per cent, the worst contraction in five quarters, as the government enforced social distancing restrictions to curb a surge in Omicron coronavirus cases.

Capital investment fell 4 per cent, the fastest decline in three years, while construction investment lost 2.4 per cent.

From a year earlier, the economy grew 3.1 per cent, compared with economists’ forecast for 2.8 per cent growth.

The BOK is expected to revise down this year’s growth forecast from the current 3 per cent estimate in its next review in May, as the country faces headwinds from the Ukraine war, United States monetary policy tightening and Covid-19 lockdowns in China.

New BOK governor Rhee Chang-yong said last week that economic growth was expected to weaken further from earlier projections and that monetary policy would need to address risks to growth and the threats from inflation.

In a separate Reuters poll, South Korea’s economy was forecast to grow 2.8 per cent this year and 2.6 per cent in 2023 after expanding at an 11-year high of 4 per cent in 2021.

The BOK this month raised its benchmark rate to 1.5 per cent, the highest since August 2019, in a surprise move as it ramped up the fight against inflation.

The IMF recently lowered its 2022 growth projection for the country to 2.5 per cent from 3 per cent, while upgrading its inflation projections to 4 per cent from 3.1 per cent.