South Korean economy grew at a slower pace in the second quarter of 2012 from three months earlier due to sluggish exports that weighed on domestic economy, a data released by the central bank showed Thursday.

Real gross domestic product (GDP), the broadest measure of economic performance, expanded 0.4 percent on-quarter in the second quarter, slower than a revised on-quarter growth rate of 0. 9 percent tallied in the first quarter, according to an advance estimate by the Bank of Korea (BOK).

From a year earlier, the real GDP advanced 2.4 percent, down from a revised on-year expansion of 2.8 percent in the prior quarter.

The slower GDP growth was widely expected as the BOK cut its 2012 growth outlook for the Asia's No.4 economy to 3 percent from an earlier estimate of 3.5 percent. The central bank lowered its policy rate by 25 basis points (bps) to 3 percent two weeks before, altering the rate for the first time in 13 months.

Slowing exports stemming from Europe's debt crisis and economic slowdown in major economies weighed on domestic production. According to a report submitted by the Ministry of Knowledge Economy to the National Assembly, the South Korean economy logged a trade surplus of 10.7 billion U.S. dollars in the first half, but exports grew at a slower rate of 0.6 percent during the period than a 2.4 percent rate of expansion for imports.

The ministry cautioned that uncertainties over exports would last in the second half given the delayed economic recovery in China and the United States as well as the protracted low-growth trend in Europe caused by the region's debt crisis. It added that it would be hard to achieve the goal of 23.5 billion dollars in trade surplus this year.

The second-quarter figure was in the low end of market expectations ranging from 0.4 percent to 0.6 percent growth. " Korea's economy slowed through the second quarter as export demand, especially from China and the U.S., weighed on production. The second-quarter GDP number will show the economy is still growing, though at a rate below potential," Moody's Analytics said in a report before the data release.

Concerns spread that the country's economic growth would remain below potential for a relatively long period of time. After cutting the policy rate, the BOK said the domestic economy will sustain a negative output gap for a considerable time going forward.

The output gap or the GDP gap refers to the difference between potential GDP and actual GDP. It is calculated by actual output minus potential output. The negative output gap means actual GDP growth stays below the one for potential GDP.

Exports of goods and services declined 0.6 percent in the second quarter from three months earlier, down from a 3.0 percent on-quarter expansion tallied in the previous quarter. Imports contracted 1.7 percent over the same period, down from a 4.3 percent growth in the prior quarter.

Private consumption grew at a slower pace of 0.5 percent during the quarter than a 1.0 percent rise for the first quarter, while consumption in the public sector shifted to a negative growth of minus 0.2 percent in the second quarter from a 3.4 percent growth in the first quarter.

"Faster reduction in imports than exports contributed to economic growth in the second quarter as seen in the fourth quarter of last year. But, the second-quarter situation was different from the one for the fourth quarter given private consumption showed a plus growth," Kim Young-bae, director general of the BOK's economic statistics department, told reporters.

After posting a 10.3 percent on-quarter expansion in the first quarter, facilities investment plunged to a minus 6.4 percent growth in the three months ending June 30, but investment in the construction sector grew 0.3 percent, a turnaround from a 1.2 percent contraction three months before.

"On an on-quarter basis, facilities investment turned to a minus growth in the second quarter as capital spending unusually surged in the first quarter. Investment that should have been made in the fourth quarter of last year was delayed to the first quarter due to the Greek fiscal crisis," said Kim.

On the production side, output in the manufacturing and building sectors reduced in the second quarter, but production in the service industry kept its growing trend, according to the BOK.

Output in the manufacturing sector retreated 0.1 percent on- quarter in the second quarter, down from a 2.0 percent expansion in the prior quarter. The reduction came as underperformance in the metal products and electronic equipments offset outperformance in the transportation equipment sector.

Production in the construction sector contacted 2.1 percent on- quarter in the second quarter, but output in the service industry advanced grew 0.5 percent over the cited period. The continued growth of the service sector was attributed to better performance in finance, insurance, wholesale, retail and restaurants & hotels industries.

Real gross domestic income (GDI), which gauges purchasing power in accordance with changes in terms of trade, grew 1.0 percent on- quarter in the second quarter.