S. Korea’s economy shrinks 0.2% in Q1 2025

The local economy shrunk in the first quarter of this year, due to weak domestic demand and increasing uncertainties over Trump tariffs.

Officials, though, expect a turnaround in the economy in the second quarter.

Moon Ji-young has the details.

South Korea's economy contracted in the first quarter of 2025 compared to the previous quarter, amid domestic and international economic uncertainties.

Preliminary data from the Bank of Korea released Thursday showed that the country's gross domestic product from January to March shrank by point-two percent on quarter, unchanged from an estimate in April.

It marked a decline in GDP following two consecutive quarters of positive growth.

The Bank of Korea explained that weak domestic demand was a primary factor in the downturn.

Looking closer, of the total decline, domestic demand contributed negative point-five percentage points, while net exports boosted the growth rate by point-two percentage points.

Imports were down 1-point-1 percent, with crude oil and natural gas among items contributing to the drop.

Exports declined by point-6 percent due to lower shipments of chemicals, chemicals, machinery, and equipment.

Facility investment dropped by point-4 percent, marking its weakest performance since the first quarter of 2024.

While construction investment declined by 3-point-1 percent, private spending also saw a decline of point-1 percent, driven by weakening demand for services.

According to an official from the Bank of Korea, domestic demand is likely to improve in the second quarter.

"The impact of U.S. tariff policies is beginning to show in sectors like automobiles and steel, and with these policies expected to expand further, exports may be negatively affected. However, overall, there are signs of improvement in domestic demand indicators."

He also said that while construction, food service, and accommodation remained sluggish, there were improvements in the consumption of durable and non-durable goods, production in the wholesale and retail sectors, and facility investment compared to the first quarter.

Meanwhile, the country's gross national income per capita advanced 1-point-5 percent in 2024 compared to the previous year

exceeding the earlier estimate of 1-point-2 percent made in March.

Moon Jiyoung, Arirang News.