The South Korean economy expanded by 1% last year, driven by strong exports. However, in the fourth quarter, there was a negative on-quarter growth due to a decline in the construction sector. The real gross domestic product (GDP) for 2025 matched the Bank of Korea’s earlier forecast but showed a slowdown from the previous year’s 2% growth.
It was the slowest growth since 2020 when the economy contracted by 0.7% during the COVID-19 pandemic. In the October-December period, the economy unexpectedly shrank by 0.3% from the previous quarter, marking its weakest quarterly performance since 2022. The central bank had initially predicted a 0.2% expansion in the fourth quarter.
“The slowdown was mainly due to base effects from strong third-quarter growth and weaknesses in construction investment,” said BOK official Lee Dong-won. Factors such as high construction costs and disruptions from a fire at the state data center negatively impacted construction investment.
On a year-on-year basis, GDP in the fourth quarter grew by 1.5%, down from the previous quarter’s 1.8% expansion. The economy had a 0.2% contraction in the first quarter due to domestic political issues and uncertainties related to global trade measures.
