South Korea’s economic performance took a hit in the first quarter of 2025 as its GDP shrank by 0.1% year-on-year, marking the first such downturn since late 2020.
The preliminary data on Thursday fell short of the anticipated 0.1% increase outlined in a Reuters survey and contrasts sharply with a 1.2% gain recorded in the final quarter of 2024. On a quarterly basis, the GDP decreased by 0.2%, reversing the modest 0.1% growth from the last quarter of the previous year.
The Bank of Korea had warned that GDP growth for 2025 is likely to underperform the February forecast of 1.5%. During this meeting, the central bank maintained the interest rate at 2.75%. The bank attributed the sluggish economic growth to weakened domestic demand and exports, hampered by ongoing political instability and challenging trade conditions.
The initial quarter of 2025 has been dominated by political turbulence, highlighted by ongoing impeachment proceedings against former President Yoon Suk Yeol and Prime Minister Han Duck-soo. While the Constitutional Court overturned Han’s impeachment in March, allowing him to act as president temporarily, it eventually ousted Yoon from office in early April. South Koreans are scheduled to elect a new president on June 3.
Additionally, South Korea’s export-reliant economy remains under pressure from global trade tensions. Although U.S. President Donald Trump had momentarily lifted his broader “reciprocal tariffs” on April 9, South Korea continues to face a 25% tariff on steel and automobiles, which are major export commodities to the U.S.
