S Korea Q1 economy contracts on weak consumption, exports

SINGAPORE (ICIS)–South Korea’s economy shrank by 0.1% year on year in the first quarter as domestic consumption remained in the doldrums amid a prolonged political crisis, while exports fell on US tariffs, central bank data showed on Thursday.

On a seasonally adjusted quarter-on-quarter basis, GDP contracted by 0.2% in the first three months of 2025, shrinking for the first time since Q2 2024, the Bank of Korea (BOK) said in a statement.

Goods exports from Asia’s fourth-largest economy slipped by 0.8% year on year in the first quarter, reversing the 2.6% growth in Q4 2024.

Latest data for the first 20 days of April point to further weakness for South Korea’s exports, falling by 5.2% year on year.

South Korea is a major importer of raw materials like crude oil and naphtha, which it uses to produce a variety of petrochemicals, which are then exported. The country is a major exporter of aromatics such as benzene, toluene, and styrene.

Private consumption, accounting for roughly half of the country’s GDP, increased by 0.9% year over year in the first quarter, lower than the 1.6% growth seen in the fourth quarter of 2024.

Manufacturing expanded at a slower pace of 0.4% year on year in the first quarter, from the 2.2% growth in the last three months of 2024.

South Korea’s economy is facing headwinds on multiple fronts.

The country is still reeling from the political chaos triggered by former President Yoon Suk Yeol’s surprise martial law declaration on 3 December, which lasted just a few hours, and ultimately led to his removal from office on 4 April.

South Korea will hold a snap election on 3 June to replace Yoon after the country’s Constitutional Court unanimously upheld a decision by the legislature to impeach Yoon.

The trade-dependent economy is also grappling with the impact of the US’ broad tariff scheme.

A 25% US reciprocal tariff announced for South Korea that was supposed to take effect on 9 April was suspended by US President Donald Trump for 90 days.

During this temporary suspension, South Korea is subject to the 10% baseline tariff and its auto industry remains affected by a 25% tariff on automobiles, which is separate from the reciprocal tariff and not paused.

The central bank forecasts a slower GDP growth of 1.5% for South Korea this year, after posting a 2.0% growth in 2024.

BoK governor Rhee Chang-yong on 17 April, however, said that the growth forecast might still be too optimistic, citing Trump’s tariff policy and its sectoral tariffs, as well as levies on China, which is South Korea’s biggest market.

Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy.

Thumbnail image: At a container pier in South Korea’s southeastern port city of Busan on 1 November 2023.(YONHAP/EPA-EFE/Shutterstock)