NewKerala.com

Key Points

South Korea's economy experienced an unexpected contraction of 0.2% in the first quarter of the year, marking its first negative growth in nine months. The decline was primarily attributed to political instability following former President Yoon Suk Yeol's martial law and uncertainties from US trade policies. Exports, facility investments, and private spending all showed weakness during this period. The Bank of Korea has consequently revised its annual economic growth forecast downward to 0.8% from an earlier projection of 1.5%.

Key Points: South Korea GDP Shrinks Amid Yoon's Crisis and Trump Tariffs

  • Economy contracts first time in nine months
  • Exports decline 0.6% quarter-on-quarter
  • Facility investment weakest since 2024
  • Political chaos dampens domestic demand
2 min read

South Korea's economy shrinks 0.2 pc in Q1

South Korean economy contracts 0.2% in Q1, impacted by political uncertainty and US trade tensions

"Trade negotiations are currently under way between South Korea and the United States - Bank of Korea"

Seoul, June 5

The South Korean economy contracted 0.2 per cent in the first quarter of this year, unchanged from an earlier estimate, central bank data showed Thursday, due mainly to a domestic political crisis and uncertainties stemming from U.S. President Donald Trump's administration's aggressive tariff scheme.

The country's real gross domestic product (GDP) -- a key measure of economic growth -- contracted 0.2 percent in the January-March period from three months earlier, which marked the first negative growth in nine months, according to the preliminary data from the Bank of Korea (BOK).

The South Korean economy had expanded 1.3 percent in the first quarter of 2024 but slipped into contraction in the second quarter with a 0.2 percent decline before posting 0.1 percent growth in both the third and fourth quarters, reports Yonhap news agency.

Exports declined 0.6 percent from three months earlier in the first quarter due mainly to slower shipments of chemicals, machinery and equipment.

Facility investment fell 0.4 percent on-quarter, marking its weakest performance since the first quarter of 2024.

Construction investment plunged 3.1 percent and private spending fell 0.1 percent in the first quarter due largely to weakening demand for services.

The unexpected negative growth came as former President Yoon Suk Yeol's imposition of martial law on Dec. 3 and the subsequent political chaos dampened domestic demand.

The U.S.' sweeping tariff scheme has also affected the trade-dependent South Korean economy.

Trump announced reciprocal tariffs, including a 25 percent levy on South Korean goods, though implementation was later postponed for 90 days. Trade negotiations are currently under way between South Korea and the United States, with the two sides aiming to reach a "package" agreement on trade and related issues by July 8, when the 90-day suspension of U.S. tariffs will end.

Last week, the central bank sharply lowered its outlook for South Korea's economic growth this year to 0.8 percent from its previous forecast of 1.5 percent, citing sagging consumption and slowing export growth amid uncertainties stemming from Washington's tariff measures.

The BOK also announced the revised data on the country's gross national income (GNI) for 2024.

The per capita GNI advanced 1.5 percent from a year earlier to US$36,745 last year. In terms of the Korean won, the GNI climbed 6.1 percent to an all-time high of 50.12 million won. Earlier, the central bank forecast that the per capita GNI went up 1.2 percent to $36,624.

—IANS

- IANS

Share this article:

Reader Comments

R
Rajesh K.
This shows how interconnected global economies are. India should learn from South Korea's situation and diversify our trade partnerships. Over-dependence on any single country (like US) can be risky. Our Make in India initiative becomes even more important now!
P
Priya M.
Very concerning for Korean tech companies that have manufacturing in India like Samsung and LG. Hope this doesn't affect their Indian operations and jobs here. 🇮🇳🤝🇰🇷
A
Amit S.
Political instability + trade wars = economic disaster. India must maintain stable governance and avoid such situations at all costs. Our growth story shouldn't be derailed by internal politics like what happened in Korea.
S
Sanjana P.
Interesting to see how quickly things can change. Just last year Korea was growing at 1.3% and now contraction. Makes me wonder if our 7%+ growth is sustainable long-term. Need to strengthen domestic consumption more.
V
Vikram J.
Maybe this is an opportunity for India to attract more Korean investment as they look for stable markets. Our FTA negotiations with Korea should consider this situation carefully.
N
Neha R.
The per capita GNI is still $36k+! Shows how far ahead developed nations are. India has come a long way but still so much ground to cover. Let's focus on consistent growth rather than getting distracted by short-term politics.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50