SEOUL, South Korea — South Korea’s economy recorded a modest one-percent growth in 2025, according to the Bank of Korea. While marking the slowest expansion for the country since the pandemic-hit year of 2020, the economy was buoyed by a global surge in demand for artificial intelligence (AI) infrastructure.
Asia’s fourth-largest economy struggled throughout the year to overcome the domestic fallout of former president Yoon Suk Yeol’s short-lived martial law declaration. The political crisis led to a 0.2-percent GDP contraction in the first quarter of 2025 and eventually resulted in the president’s impeachment and a subsequent five-year prison sentence for obstructing justice.
Exports as the Growth Engine Despite the domestic instability, South Korea’s export sector remained a powerhouse, growing 4.1 percent year-on-year. As the home of semiconductor giants Samsung Electronics and SK Hynix, the country benefited significantly from the global AI boom, which kept the demand for high-end chips at record levels.
The central bank’s statement noted:
- Consumption: Both private and government consumption saw slight expansions.
- Construction: The industry faced a widening decline, serving as a primary drag on the overall GDP.
- Manufacturing: Growth in this sector slowed compared to 2024’s two-percent overall economic expansion.
Recovery and 2026 Outlook Following the dismal start to the year, the economy showed signs of resilience with a 0.7-percent rebound in the second quarter and a 1.3-percent climb in the third.
The Bank of Korea remains cautiously optimistic for 2026, projecting a growth rate of 1.8 percent. This forecast is predicated on a recovery in domestic demand and the continuation of a “robust semiconductor cycle.” However, analysts warn that the pace of recovery will depend heavily on the stabilization of the country’s political landscape and the continued strength of global tech infrastructure investments.