South Korea’s economy shrank in the final quarter of 2025 due to a broad pullback in demand, underscoring the challenge for authorities whose policy options to stimulate growth are constrained by a wobbly won and mounting financial risks.
Gross domestic product contracted 0.3% in the three months through December from the previous quarter, the Bank of Korea said Thursday. That marked a sharp slowdown from the revised 1.3% growth in the prior quarter and missed the median estimate for a 0.2% expansion in a Bloomberg survey. For 2025 as a whole, the economy expanded 1%, in line with estimates.
The figures highlight the uneven recovery as export-oriented sectors tied to chips continue to outperform small businesses. It’s an effect visible in financial markets, where the benchmark Kospi index has risen in almost every session so far this year. The data aren’t likely to prompt action from the BOK, which shifted its policy stance to neutral just last week, and likewise don’t point to major implications for the global economy.
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