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South Korea’s Economy Shrinks in Q1 2025

With GDP contracting and key sectors like construction and investment under pressure, a recession cannot be discarded

By EC Invest

South Korea's economic activity fell by 0.2% in the 1st quarter of 2025 compared to the previous three months. Annual GDP growth fell into the red for the first time since the end of 2020, at -0.1%.

ECI SOUTH KOREA Economy Contracts GRAPHIC 920x320

At the beginning of the year, the South Korean economy suffered from the domestic political crisis and disruption in world trade.

Domestic uncertainty slowed household consumption (-0.1%) and public spending (-0.1%). Construction also suffered particularly hard (-3.2%).

In addition to domestic political turmoil, international trade disruptions have also affected South Korean companies. This slowed their investments (-2.1%) and penalised exports (-1.1%). It should be noted that the weakness of domestic demand also led to a sharp decline in imports (-2%).

Expect a sluggish economy

The decline in economic activity will push the Central Bank to reduce its key rate. However, this monetary easing will not prevent the South Korean economy from remaining sluggish in the coming quarters.

A further decline in GDP in the second quarter, which would push South Korea into recession, cannot be totally ruled out. Don't buy South Korean stocks. For our asset allocation strategy, discover our portfolio suggestion.

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