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South Korea’s Economy Shrinks in Q4, Leaving 2025 Growth at 1%

Investment pullbacks plus weaker exports drove the setback under a policy stance shaped by a sliding won.

Street vendors (L) wait for customers at Myeongdong shopping district in Seoul, South Korea, January 9, 2023. REUTERS/Kim Hong-Ji
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A man walks past an electronic screen showing South Korea's benchmark stock index surpassing 5,000 points in a foreign exchange dealing room at the Hana Bank headquarters in Seoul on January 22, 2026

Overview

  • Advance Bank of Korea estimates show GDP fell 0.3% quarter-on-quarter in Q4, missing expectations for a slight gain and marking the sharpest drop since late 2022.
  • Facility investment declined 1.8%, construction investment fell 3.9%, and exports slid 2.1%, while private consumption rose 0.3% on the quarter.
  • Full-year growth slowed to 1.0% in 2025, the weakest since 2020, with Q4 output up 1.5% from a year earlier.
  • The central bank kept rates unchanged and signalled an end to its easing cycle to support foreign-exchange stability, as the won weakened and capital outflow risks persisted.
  • A semiconductor upswing tied to AI demand lifted shares, with the Kospi briefly topping 5,000, as officials project 2026 growth of 1.8%–2.0% and trade-policy risks include new U.S. chip tariffs and potential demands for more onshore production.