South Korea’s Economy Slowed Sharply in Second Quarter

South Korea’s economy slowed at a sharper-than-expected pace in the second quarter on sluggish private consumption and weak business investments, losing steam after a solid recovery in the previous quarter.

Gross domestic product in Asia’s fourth-largest economy expanded 2.3% year-over-year during the April-June period, slower than the prior quarter’s revised 3.3% growth, Bank of Korea preliminary data showed Thursday.

On a quarter-on-quarter basis, the economy shrank 0.2% following the first quarter’s 1.3% expansion, according to the central bank. That marked the weakest performance since late 2022.

The latest quarterly GDP data missed a median forecast compiled by The Wall Street Journal from five economists penciling in a 2.4% on-year expansion and a 0.1% on-quarter contraction.

Exports maintained steady growth on external demand during the second quarter, but private consumption and construction investment returned to contraction for the period, the central bank data showed.

Facility investment contracted at a faster pace while government spending weakened slightly during the quarter, the data showed.

Market analysts say a prolonged period of tight monetary policy and higher borrowing costs have suppressed consumer spending and business investments in South Korea.

The weak GDP print is expected to put pressure on the central bank to pivot toward policy easing to spur growth in the economy.

The bank this month left its benchmark policy rate unchanged at a 15-year high of 3.50% for a 12th straight time—the longest such streak ever.

Market expectations are growing for the bank to start rate cuts later this year. A recent poll of economists by the Journal found that some penciled in a rate cut as early as in August while most forecast the start of policy easing in October or November.

The bank expects South Korea’s economy to grow 2.5% this year following 1.4% growth in 2023. It expects economic growth to slow to 2.1% next year.

Write to Kwanwoo Jun at Kwanwoo.Jun@wsj.com