Seoul: The South Korean economy posted negative growth from three months earlier in the first quarter, the first on-quarter contraction in nine months, central bank data showed Thursday, amid a domestic political crisis and uncertainties stemming from the Donald Trump administration's sweeping 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 a quarter earlier, according to the preliminary data from the Bank of Korea (BOK).
According to Yonhap News Agency, Asia's fourth-largest economy 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 barely growing 0.1 percent in both the third and fourth quarters. The negative growth came as the growth of exports has slowed and domestic demand remained in the doldrums.
In detail, exports declined 1.1 percent from three months earlier in the first quarter due mainly to slower shipments of chemicals, machinery, and equipment. Facility investment dipped 2.1 percent on-quarter, while construction investment plunged 3.2 percent. Private spending also fell 0.1 percent in the first quarter, due largely to weakening demand for services, and government spending edged down 0.1 percent. On a year-on-year basis, the economy contracted 0.1 percent in the first quarter, compared with a 1.2 percent on-year expansion in the previous quarter, the data showed.
Former President Yoon Suk Yeol's shocking imposition of martial law on Dec. 3 caused a political chaos. Yoon was removed from office on April 4. The U.S.' sweeping tariff scheme has also affected the trade-dependent South Korean economy. Trump earlier announced "reciprocal" tariffs that include a 25 percent tariff for South Korea, though he soon decided to put on hold its implementation for 90 days. Apart from the reciprocal tariffs, auto and steel tariffs are already in place.
The BOK earlier presented a 1.5 percent growth outlook for the South Korean economy in 2025, but BOK Gov. Rhee Chang-yong told reporters last week that the forecast may have been "too optimistic," given Trump's tariff policy, including its sectoral tariffs and levies on China.