South Korea is on track to post economic growth of 0.1% or less for a fourth consecutive quarter, an unprecedented stretch of stagnation even during past financial crises, fueling calls for aggressive stimulus and policy action.

The Bank of Korea (BOK) said in a report on April 17 that first-quarter growth would likely fall below its earlier estimate of 0.2%, warning that a contraction could not be ruled out. Even in a best-case scenario, growth is unlikely to exceed 0.1%.

If confirmed, it would mark the fourth straight quarter of 0.1% or weaker growth since the second quarter of 2024, a pattern unseen in South Korea’s modern economic history. The BOK blamed prolonged domestic political uncertainty following the martial law crisis, alongside weakening business sentiment due to growing concerns over U.S. tariff policies under President Donald Trump’s administration.

This is a scenario the country did not experience even during the 1997 Asian financial crisis or the 2008 global financial meltdown. At those times, while growth sharply contracted for two or three quarters, the economy quickly rebounded by 1–2% in the following quarter. South Korea also showed similar resilience during the COVID-19 pandemic in 2020.

A deserted street is seen in the Bansong-dong area of Haeundae District in Busan, on Jan. 16, 2025. Haeundae, which had a population of 376,404 as of December 2024 — the largest among Busan’s districts — has recently been designated a population risk area due to a sharp outflow of young residents and rapid aging, officials say./Kim Dong-hwan

Economists warn the prolonged stagnation reflects deeper structural weaknesses beyond external risks. Persistently weak domestic demand, an aging population, and delayed structural reforms have eroded the country’s economic resilience.

“Even during COVID-19, there was hope for a sharp V-shaped rebound,” said Lee Jung-hee, an economics professor at Chung-Ang University. “But as aging continues to weigh on consumption, the economy is steadily losing its capacity to recover.”

South Korea’s potential growth rate — the maximum sustainable rate without sparking inflation — has steadily fallen from around 5% in the early 2000s to the mid-3% range in the 2010s, and is now estimated near 2%.

“To avoid further declines, we need urgent discussions on how to improve labor and capital productivity and accelerate technological innovation,” said Koo Yun-cheol, a visiting professor at Seoul National University.

Acting President and Prime Minister Han Duck-soo speaks during an emergency Cabinet meeting to review South Korea’s first supplementary budget proposal for 2025 at the government complex in Seoul on April 18, 2025./Prime Minister’s Office

Economists are calling for faster, bolder policy moves, including a larger supplementary budget and interest rate cuts. The government recently announced a 12.2 trillion won ($8.8 billion) extra budget, but critics say it focuses too heavily on disaster response and trade competitiveness, offering little support for household consumption.

“With domestic demand already weak and the impact of U.S. tariffs expected to grow after the election, a post-election supplementary budget will be inevitable,” said Joo Won, head of economic research at Hyundai Research Institute. “To support even 0.7–0.9% growth this year, an additional 30 trillion won in fiscal support may be needed.”

However, tight public finances remain a major hurdle. South Korea’s deficit-financed debt is expected to climb to 885.4 trillion won this year following the extra budget, up 11.8% from a year earlier.

“While fiscal discipline matters, the severity of the economic slowdown means we can’t afford to wait,” said Kim Jung-sik, an emeritus professor of economics at Yonsei University. “Rate cuts should come sooner, with fiscal support scaled up, even if belt-tightening follows later.”