SEOUL: South Korea’s economy expanded 1.0% in 2025, its slowest annual growth since 2020, as weakening investment offset gains in exports and household spending, central bank data showed. The Bank of Korea said real gross domestic product fell 0.2% in the October-December quarter from the previous three months, a 0.1 percentage point upward revision from its January estimate. Output rose 1.5% from a year earlier in the fourth quarter, the bank said. The full-year figure compared with 2.0% growth in 2024.
On the expenditure side, exports of goods and services increased 4.1% in 2025, while private consumption rose 1.3% and government consumption gained 2.8%, the Bank of Korea said. Investment remained a drag: gross fixed capital formation fell 3.3%, reflecting a 9.9% drop in construction investment, while facilities investment climbed 2.0%. Imports grew 3.8% for the year. Final consumption expenditure rose 1.7% overall, with services exports up 9.3% and goods exports up 3.1%.
By industry, manufacturing output rose 2.0% in 2025 and services activity increased 1.7%, while construction contracted 9.6%, reflecting broad declines in building and civil engineering work. Agriculture, forestry and fishing grew 1.4% for the year, and electricity, gas and water supply slipped 0.6%. The central bank said the expansion in services strengthened over the year, while the downturn in construction deepened and manufacturing growth moderated. The annual result followed quarter-to-quarter volatility across 2025, ending with a decline in the final quarter.
Quarter-end pullback led by investment and trade
The Bank of Korea’s fourth-quarter update showed household demand held up even as investment weakened. Private consumption rose 0.3% from the previous quarter as spending on services such as health care increased, while purchases of some goods, including motor vehicles, fell. Government consumption increased 0.6%, driven mainly by health care benefits. Construction investment dropped 3.9% and facilities investment fell 1.8%, led by lower spending on transportation equipment. Investment in intellectual property products slipped 0.4%.
Real GDP in the fourth quarter was revised to a 0.2% contraction from the advance estimate of a 0.3% drop, the central bank said in its March release on gross national income. Even with the quarter-on-quarter decline, output was 1.5% higher than a year earlier. The quarterly pattern in 2025 showed real GDP falling 0.2% in the first quarter, rising 0.7% in the second and 1.3% in the third, before easing at year end. In the fourth quarter, services grew 0.6% while manufacturing fell 1.5% and construction declined 5.0% from the previous quarter.
Income data lift late-2025 reading
The March update also showed a stronger income picture for the final quarter. Real gross national income rose 1.4% from the previous quarter, while the Bank of Korea’s January GDP release put real gross domestic income at a 0.8% quarterly increase. Gross national income measures output adjusted for cross-border income flows, adding income earned by residents abroad and subtracting income paid to overseas residents. For 2025 as a whole, real gross domestic income rose 1.7%. The bank said the GDP revision was 0.1 percentage point higher than the advance estimate.
In its January national accounts report, the central bank said fourth-quarter exports fell 2.1% from the previous quarter as shipments of motor vehicles and machinery and equipment declined, while imports dropped 1.7% led by lower purchases of natural gas and cars. For the full year, the economy’s 1.0% growth reflected steady gains in exports and consumption alongside a wider decline in construction. Services and manufacturing expanded, while construction output fell 9.6% for the year. The Bank of Korea reported the figures in its national accounts releases covering 2025 – By Content Syndication Services.