South Korea's Economy Shrinks in First Quarter of 2025
(MENAFN) South Korea's economy contracted in the first quarter of 2025, marking its first shrinkage in nine months, according to the Bank of Korea's latest data. The nation's real GDP declined by 0.2% compared to the previous quarter, highlighting the impact of ongoing domestic political unrest and growing global trade challenges, media sources reported on Thursday.
Despite a resilient performance in 2024, where the economy grew 1.3% in the first quarter before fluctuating with small declines and gains in the latter half of the year, the first quarter of 2025 faced significant setbacks.
BOK official Lee Dong-won explained that “prolonged domestic political uncertainty and rising risks in global trade environments due to uncertainties stemming from the US tariff policy have delayed the recovery in consumer and investment sentiment.”
Lee also pointed to other “unusual” negative factors, including postponed demand for high-performance semiconductors, project suspensions at certain construction sites, and the effects of large-scale wildfires.
Exports, a critical pillar of South Korea's economy, also took a hit, with outbound shipments dropping by 1.1% during the January-March period. This downturn was largely driven by weaker exports in chemicals, machinery, and equipment.
The contraction coincided with a period of political turmoil, which followed former President Yoon Suk Yeol’s imposition of martial law on December 3, triggering a national crisis that dampened consumer confidence. Yoon was ousted on April 4 after the Constitutional Court upheld his impeachment following a unanimous National Assembly vote.
Further complicating matters were U.S. trade policies, including President Donald Trump's proposed "reciprocal" tariff plan, which includes a 25% tariff on South Korean goods, although its implementation was temporarily paused for 90 days.
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