South Korea’s real gross domestic product (GDP) contracted by 0.2 percent in the first quarter from the previous three-month period, marking a clear reversal in growth momentum. Since the second quarter of last year, quarterly growth has effectively stalled, coming in at -0.2 percent, 0.1 percent, 0.1 percent, and now once again -0.2 percent. This is the first time the country has recorded four consecutive quarters of sub-0.1 percent growth—even during the 1997 Asian financial crisis and the 2008 global financial meltdown. While those downturns were steeper, recoveries were swift. This time, South Korea appears to be sliding into a prolonged era of low growth.
The outlook for the second quarter offers little reassurance. The government has proposed a supplementary budget of 12.2 trillion won ($8.5 billion), which officials say could lift GDP by a mere 0.1 percentage point. Yet with the full impact of the United States’ tariff war now beginning to unfold, another quarter of negative growth would formally mark the onset of a recession.
With the economy already battered by emergency measures and looming trade shocks, there is little room for a self-sustained rebound. The National Assembly must pass the supplementary budget without delay. The Bank of Korea should also consider an additional interest rate cut. At the same time, the government must intensify trade negotiations with Washington to secure exemptions from the proposed 25 percent tariffs on key exports such as automobiles and steel.
Still, experts warn that such measures may prove insufficient. A growing number of economists argue that South Korea has already passed its economic apex. In a recent survey, nearly two-thirds of respondents—52.3 percent “somewhat agree” and 14.4 percent “strongly agree”—said the country’s global competitiveness is in decline. Only 31.5 percent disagreed.
The nation, they say, has lost its economic drive. Workers are increasingly perceived to prioritize leisure over productivity, while labor strikes demanding higher pay often follow even modest contributions. Rather than confronting these trends, the political establishment is accused of amplifying them through populist policies. Innovation is stifled before it can take root. Meanwhile, lawmakers are now competing to promise a four-day workweek ahead of the next presidential election.
This stagnation did not come without warning—it was long in the making. Unless the current trajectory is reversed, South Korea risks drifting into a lost decade—or even two—mirroring Japan’s prolonged economic malaise.
