South Korea Economy Shows Weak Q4 2025 Growth as Domestic Demand Falters

South Korea’s economy recorded minimal growth in the final quarter of 2025, as weak domestic demand and slowing private investment continued to weigh on overall activity, according to a Reuters poll of economists. While exports remained a key source of support, they were not enough to offset broader internal economic softness.

Asia’s fourth-largest economy was expected to expand by just 0.1% quarter-on-quarter in the October to December period on a seasonally adjusted basis. This marked a sharp slowdown from the 1.3% growth seen in the third quarter, which had been the fastest pace in more than a year. The forecast reflects the median estimate of 21 economists, although several warned that unfavourable base effects from the previous quarter may be distorting the headline figure. A number of analysts even expect the economy to have contracted slightly in the fourth quarter.

Economists pointed to persistent weakness in domestic demand, particularly in construction investment and discretionary household spending. These factors have remained under pressure despite earlier fiscal support measures. In contrast, South Korea’s export sector continued to perform relatively well, driven largely by strong global demand for semiconductors and automobiles. Official trade data showed exports rose 13.4% year-on-year in December to $69.58 billion, marking a seventh straight month of growth, even as South Korean goods faced a 15% tariff in the United States.

On an annual basis, gross domestic product was forecast to grow 1.9% in the fourth quarter, broadly in line with the 1.8% expansion recorded in the previous quarter. This stability largely reflects the ongoing contribution from exports, which have helped cushion the slowdown in domestic sectors.

Economists also noted that the positive impact of the government’s 31.8-trillion-won supplementary budget, including cash handouts aimed at boosting consumption, had already been reflected in third-quarter growth. As a result, the fourth quarter saw less fiscal momentum. At the same time, monetary policy support appeared to be fading, with the Bank of Korea signalling the end of its easing cycle amid a weakening won and rising housing prices in Seoul.