Seoul  - South Korea's economy contracted a more-than-expected 5.6 per cent in the final quarter of 2008 - its biggest drop since the Asian financial crisis a decade ago - as exports shrank, domestic consumption waned and business investment declined, the central bank said Thursday.

The fall in the country's gross domestic product (GDP) from the quarter before contrasted with a 0.5-per-cent rise in the third quarter. On a year-on-year basis, the fourth-quarter fall was 3.4 per cent as the global economic crisis gripped South Korea, the Bank of Korea said.

The quarter-on-quarter contraction was more than twice what economists had predicted. It was also the worst decline since 1998's first quarter, when GDP fell 7.8 per cent.

For all of 2008, South Korea's economy expanded 2.5 per cent, down from 5-per-cent growth in 2007, the central bank said.

The Bank of Korea has forecast 2-per-cent growth for 2009. (dpa)