South Korea's economy grew a seasonally adjusted 0.4 percent in the October-December period from the previous quarter, half the pace forecast by analysts and the worst in two years, piling the pressure on the government to boost spending and the central bank to cut interest rates.

Advance estimates released by the country's central bank on Thursday showed Asia's fourth largest economy took a severe hit across the board from the shocks of the euro zone crisis, cooling demand in the major economies and a sluggish domestic economy.

"Interest rates are likely to be lowered sometime in the second quarter because domestic consumption remains weak. But price pressure is still a big concern and the policymakers are likely to wait until they see signs that inflation is trending down," said Suh Daeil an economist at Daewoo Securities.