INCHEON, SOUTH KOREA – MAY 22: Buyers have a look at items at a Wal-Mart retailer Could 22, 2006 in Incheon, South Korea.
Chung Sung-jun | Getty Photographs Information | Getty Photographs
South Korea’s financial development slowed within the closing quarter of final 12 months as a pointy droop in development funding and a pullback in exports outweighed modest beneficial properties in consumption.
The economic system expanded 1.5% within the October to December interval from a 12 months earlier, in response to the central financial institution’s advance estimates, lacking economists’ forecast of 1.9%. That in contrast with 1.8% development within the prior quarter, when the economic system expanded at its quickest tempo in over a 12 months.
On a quarterly foundation, gross home product contracted 0.3%, marking the steepest slowdown for the reason that fourth quarter of 2022. Economists polled by Reuters had anticipated a 0.1% growth.
For the complete 12 months, South Korea’s economic system grew 1%, its slowest annual growth since 2020, when output contracted 0.7% throughout the pandemic.
Building funding shrank 3.9% from the earlier quarter as each constructing and civil engineering exercise declined, in response to knowledge from the Financial institution of Korea. Amenities funding fell 1.8%, led by a drop in transportation gear.
Exports pulled again 2.1% from the earlier quarter as motor autos and equipment shipments fell. Manufacturing and utilities provide, together with electrical energy, gasoline and water, dropped 1.5% and 9.2%, respectively.
In the meantime, non-public consumption expanded 0.3% on companies expenditures whereas authorities spending rose 0.6%, pushed by well being care advantages.
South Korean President Lee Jae Myung and his American counterpart, Donald Trump, reached a commerce settlement in November that included $150 billion in Korean funding within the U.S. shipbuilding sector and an extra $200 billion in funding pledges.
In trade, the Trump administration agreed to cut back tariffs on South Korean vehicles and auto elements to fifteen% from 25%.
The nation’s exports have largely held up final 12 months regardless of heightened commerce uncertainties. Its exports rose to a document $709.7 billion in 2025, up 3.8% from a 12 months earlier, pushed by semiconductor shipments, which jumped 22% amid surging demand for synthetic intelligence chips.
Tariff tensions continued to cloud the outlook for the export-oriented economic system. Final week, Trump imposed a 25% tariff on sure imported AI chips as a part of his push to encourage semiconductor manufacturing within the U.S.
U.S. Commerce Secretary Howard Lutnick had urged South Korean and Taiwanese chipmakers might face tariffs of as much as 100% until they decide to elevated manufacturing in America.
Lee on Wednesday downplayed the renewed menace of semiconductor tariffs, saying the prices would probably be handed on to American shoppers.
Inflation has remained subdued, easing to 2.1% final 12 months from 2.3% in 2024, broadly consistent with the central financial institution’s 2% goal.
The Financial institution of Korea final week stored its benchmark rate of interest unchanged at 2.5%, as policymakers prioritize monetary stability amid a sharply weakening gained and accelerating capital outflows.
The gained has faltered greater than 6% towards the greenback since July final 12 months, hovering close to 16-year lows, pushed partly by Korean retail buyers piling into U.S. equities. Market intervention efforts, together with waiving the foreign-exchange stability levy for banks to spice up the provision of U.S. {dollars}, have to this point didn’t halt the forex’s decline.
The gained has misplaced practically 2% towards the dollar this 12 months as of Thursday, making it certainly one of Asia’s worst-performing currencies.
The Ministry of Financial system and Finance final week raised its 2026 GDP forecast, anticipating the financial development to speed up to 2%, up from its August projection of 1.8%.
