South Korea’s economy contracted in the first quarter of 2025, prolonging an unprecedented streak of weak growth, as sluggish domestic demand and a deepening construction slump dragged on output, central bank data showed on April 24.
The country’s real gross domestic product (GDP) shrank 0.2% in the January-March period from the previous quarter, according to advance estimates from the Bank of Korea (BOK). The figure sharply missed the BOK’s earlier projection of 0.2% growth and marked the fourth consecutive quarter of sub-0.1% expansion—an unbroken run not seen even during past financial crises.
The result reflects growing strain on the economy even before the full impact of renewed U.S.-China trade tensions under President Donald Trump is felt.
From Q2 2024 to Q1 2025, quarterly GDP growth registered -0.2%, 0.1%, 0.1%, and -0.2%, effectively stalling annual growth near zero.
Not even the 1997 Asian financial crisis, the 2008 global financial meltdown, or the 2020 COVID-19 pandemic saw such prolonged quarterly weakness, with recoveries typically taking hold after two or three quarters.
Real gross national income (GNI) also fell 0.4% in the first quarter, reversing gains from the prior quarter and declining for the first time in three quarters.
Private consumption edged down 0.1% amid weaker spending on healthcare and cultural services. Construction investment dropped 3.2%, marking a fourth straight quarterly decline, with the building sector at the center of the slump. The sector’s contribution to growth fell by 0.4 percentage points, continuing to drag on overall output since mid-2024.
Facility investment also shrank 2.1%, primarily due to weaker spending on semiconductor equipment and machinery, posting the steepest drop since Q3 2021.
Net exports, which have previously helped shore up the economy, contributed just 0.3 percentage points in Q1, remaining subdued since early 2024.
Economists say the economy is being squeezed on both domestic and external fronts. The combination of political uncertainty, a sluggish job market, and a housing market downturn is dampening consumer sentiment, they say.
The government recently passed a 12.2 trillion won ($8.8 billion) supplementary budget aimed at boosting demand, and the BOK expects it could lift GDP by 0.1 percentage point. But analysts warn that the impact may be too small to reverse the trend.
“Concerns about sub-1% growth this year are already emerging,” said Joo Won, an economist at Hyundai Research Institute. “The BOK may have missed its window to support the economy. Rate cuts are now essential to avoid a deeper slump.”
