South Korea's 2025 growth slows to 1% as GDP contracts in 4Q

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SEOUL, January 22 (AJP) - South Korea’s economy expanded 1 percent last year, slowing sharply from the previous year as weak domestic demand, particularly in construction and investment, weighed on growth, according to central bank data released on Wednesday.

The pace was about half of the 2 percent growth recorded a year earlier and fell well below the country’s estimated potential growth rate of 1.8 percent.

Preliminary data from the Bank of Korea showed real gross domestic product contracted 0.3 percent in the fourth quarter of 2025 from the previous quarter. The result was 0.5 percentage points below the bank’s forecast of 0.2 percent growth and marked the weakest quarterly performance since the fourth quarter of 2022, when the economy shrank 0.4 percent.

Graphics by Song Ji-yoon

Quarterly growth has been volatile over the past two years. GDP expanded 1.2 percent in the first quarter of 2024, before slipping to a contraction of 0.2 percent in the second quarter, followed by modest growth of 0.1 percent in both the third and fourth quarters.

Growth turned negative again in the first quarter of last year, falling 0.2 percent, then rebounded to 0.7 percent in the second quarter and 1.3 percent in the third, before returning to contraction in the final quarter.

In the fourth quarter, private consumption rose 0.3 percent from the previous quarter, supported by services such as medical care, although spending on goods including passenger cars declined. Government consumption increased 0.6 percent, driven mainly by higher national health insurance benefits.

Investment remained a drag on growth. Construction investment fell 3.9 percent as both building and civil engineering activity weakened, while facility investment declined 1.8 percent, led by lower spending on transport equipment such as automobiles.

Exports dropped 2.1 percent, reflecting weaker shipments of automobiles, machinery and equipment. Imports fell 1.7 percent, largely due to declines in natural gas and automobile purchases.

By industry, manufacturing output fell 1.5 percent, weighed down by transport equipment and machinery and equipment. Output in electricity, gas and water utilities plunged 9.2 percent, mainly due to lower electricity production, while construction activity contracted 5 percent. Agriculture, forestry and fisheries rose 4.6 percent, and services expanded 0.6 percent.

Real gross domestic income increased 0.8 percent in the fourth quarter, outpacing the 0.3 percent contraction in real GDP.

* This article, published by Aju Business Daily, was translated by AI and edited by AJP.
Seo Min-ji 기자 vitaminji@ajunews.com

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