South Korea has had a booming economy over the past half decade. The country recovered from the COVID-19 pandemic and hasn’t seen a decrease since the fourth quarter of 2020. That changed in the first part of 2025. For the first time in four years, the country saw its GDP shrink, and there is one industry that is mostly to blame.
South Korea GDP Q1 2025
South Korea saw its GDP shrink by 0.1% year on year in the first quarter of this year. In a recent Reuters poll, the prediction was a small rise, but it just missed the mark. The biggest reason for the decrease? The construction industry. That industry saw a massive 12.4% decrease year on year, according to the Bank of Korea (BOK). On April 17, BOK warned that economic growth would be slow due to political unrest and the ongoing trade issues.
The trade issues are something Americans are very familiar with. The ongoing tariffs imposed by President Donald Trump have caused unrest with everyone. While South Korea temporarily suspended the reciprocal tariffs on April 9th, the 25% tariffs on steel and automobiles remain in effect. Incidentally, those items are the biggest exports to the United States.
Political Unrest And Upcoming Trade Talks
South Korea is going through impeachment trials for former president Yook Suk Yeol and prime minister Han Duck-soo. This has caused uncertainty about who will ultimately end up in office and be making the economic decisions. These will hopefully be wrapped up soon, but it is hard to tell. The biggest hope for relief is in upcoming trade talks with the United States.
A South Korean team is heading to the US tomorrow to hopefully have trade talks with President Trump. The Ministry of Trade announced today that while they were hoping for a meeting, nothing had been finalized. If the two sides are able to come to an agreement, it could help the economy bounce back in the second quarter.
Final Thoughts
South Korea is one of many countries dealing with economic hardships in the first months of 2025. It shows how connected the global economy is at times. When one country is experiencing some volatility, other countries are affected as well. Again, there is optimism that the economy could rebound in Q2, but it will be something to watch. If things continue to remain uncertain, we could see economies continue to struggle.
