S. Korea GDP Falls 0.2% Q1 2025, Manufacturing Declines

Seoul, South Korea - The nation's economy contracted by 0.2% in the first quarter compared to the previous quarter, as manufacturing activity declined and domestic demand softened, the Bank of Korea announced on Thursday.

Real gross domestic product remained unchanged compared to the same period last year at 0.0% growth, according to preliminary data released by the central bank. 

Nominal GDP fell 0.4% quarter-on-quarter but expanded 2.4% year-on-year.

The quarterly contraction was primarily driven by a 0.6% decline in manufacturing output, with the Bank of Korea citing reduced production in chemicals and chemical products, as well as machinery and equipment. 

Within the manufacturing sector, ICT production increased by 3.2%, while non-ICT manufacturing decreased by 1.8%.

Construction activity decreased by 0.4% quarter-on-quarter, primarily due to a decline in building construction projects. 

The services sector contracted 0.2% despite growth in financial services and information technology, as declines in transportation and real estate activities offset those gains.

Private consumption expenditure fell 0.1% quarter-on-quarter, as reduced spending on services, particularly entertainment and culture, outweighed increases in goods consumption, including telecommunications equipment. 

Government consumption remained unchanged from the previous quarter.

Investment showed mixed performance across categories. 

Construction investment decreased 3.1% quarter-over-quarter, while equipment investment declined 0.4%, with machinery purchases, including semiconductor manufacturing equipment, falling significantly. 

However, knowledge-based capital investment increased by 1.5%.

Trade activity contributed negatively to economic growth. 

Exports decreased 0.6% quarter-on-quarter, primarily due to lower shipments of chemical products and machinery. 

Meanwhile, imports fell 1.1%, primarily due to a decline in energy imports, including crude oil and natural gas.

Real gross national income increased 0.1% quarter-on-quarter and 0.7% year-on-year. 

In comparison, nominal GNI increased 0.1% quarter-on-quarter and 3.2% year-on-year, supported by higher net factor income from abroad, totaling KRW 13.9 trillion.

The GDP deflator increased by 2.4% year-over-year. The gross savings rate declined to 34.9% from 35.3% in the previous quarter, while the domestic investment rate fell to 28.9% from 29.7%.

The central bank noted that the preliminary data incorporated additional statistics from the final month of the quarter that were not available during the initial preliminary estimate, resulting in upward revisions to equipment investment and exports, though imports were also revised higher.

The Bank of Korea's Economic Statistics Department prepared the report, with detailed statistics available through the bank's Economic Statistics System.