S. Korea Q4 GDP Slipped on Weak Construction Investment
By Reuters | 21 Jan, 2026

The surprise contraction was at the steepest pace in three years after 1.3% growth in Q3 and was due to a 3.9% drop in construction.

South Korea's economy unexpectedly shrank in the final quarter of 2025, marking the biggest contraction in three years, advanced central bank estimates showed on Thursday. 

Gross domestic product decreased 0.3% in the October-December period from the preceding three months on a seasonally adjusted basis, compared with a median 0.1% increase tipped in a Reuters poll of economists. 

The economy contracted by the steepest pace since the fourth quarter of 2022, after expanding 1.3% in the previous quarter. 

Construction investment, down 3.9%, was the biggest drag, while facility investment dropped 1.8%. Private consumption rose 0.3%, after expanding 1.3% in the previous quarter on a boost from the government's extra budget. 

Exports fell 2.1% and imports declined 1.7%, bringing a net negative contribution of 0.2 percentage points. 

The Bank of Korea last week signalled an end to its current easing cycle after keeping interest rates unchanged, prioritising foreign exchange stability as it flagged upside risk to this year's economic growth.

On a year-on-year basis, GDP expanded 1.5% in the fourth quarter, after rising 1.8% in the third quarter, also missing economists' expectations for a median 1.9% increase.

Asia's fourth-largest economy grew 1.0% in 2025, after growing 2.0% in 2024, marking the slowest annual growth since 2020, according to the BOK, which expects the economy to grow 1.8% in 2026. 

The government expects stronger growth of 2.0% this year. 

(Reporting by Jihoon Lee and Cynthia Kim; Editing by Jamie Freed)