Korea's real gross domestic product (GDP) grew 1% from a year earlier in the previous year. Construction slumped to its worst level since the 1998 Asian financial crisis, but modest improvements in consumption and facility investment barely kept the growth rate at 1%. The result is in line with projections offered by the Bank of Korea and the government.
According to the "advance estimate of real gross domestic product for the fourth quarter and full year 2025" released by the Bank of Korea on the 22nd, last year's real GDP growth rate was tallied at 1%. GDP is the sum of the market value of all final goods and services produced within a country's borders over a given period, calculated as the sum of consumption, investment, government spending, and net exports (exports minus imports).
The annual growth rate matched the existing projections of the government and the Bank of Korea. In the "2026 economic growth strategy" released in Jan., the government projected last year's real GDP growth rate at 1%, and the Bank of Korea presented the same figure in its revised economic outlook in Nov. International organizations, including the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD), also projected a similar level.
By expenditure item, exports rose 4.1%, outpacing the growth rate. The growth rate was lower than in 2024 (6.8%) but higher than in 2022 (3.9%) and 2023 (3.4%). However, with the import growth rate rising 1.3 percentage points (p) from a year earlier to 3.8%, the momentum in net exports was limited.
Consumption and facility investment improved from the previous year. Last year, private consumption grew 1.3% and government consumption grew 2.8%. Those were 0.2 percentage point and 0.7 percentage point higher, respectively, than a year earlier. Private consumption saw the biggest increase since 2023, and government consumption since 2022. Facility investment also grew 2%, with a higher growth rate than the previous year (1.7%).
In contrast, construction investment fell 9.9%, deepening the slump. After turning to a decline in 2021 (-0.2%), construction investment continued to fall for five consecutive years—2022 (-3.5%), 2023 (-0.5%), and 2024 (-3.3%). Last year's drop was the largest since 1998 (-13.2%).
By economic activity, construction contracted 9.6%, posting negative growth. The decline widened to 2.5 times the previous year's (-3.8%). The electricity, gas and water supply sector also fell 0.6%, turning to a decrease. The manufacturing growth rate slowed from 4.3% to 2%, while agriculture, forestry and fisheries expanded from 0.6% to 1.4%. Services improved slightly from 1.6% to 1.7%.
Real gross domestic income (GDI) grew 1.7% on an annual basis. That was about half of the previous year's (3.9%) and fell short of the real GDP growth rate due to worsening terms of trade.
Real GDP in the fourth quarter of last year fell 0.3% from the previous quarter. That was 0.5 percentage point lower than the Bank of Korea's projection (+0.2%) presented in Nov. By quarter, after -0.2% in the first quarter, it posted 0.2% in the second quarter and 1.3% in the third quarter before turning negative again. The decline was the largest in three years, since the fourth quarter of 2022 (-0.4%).
By expenditure item in the fourth quarter, private consumption rose 0.3% and government consumption rose 0.6%, but construction investment fell 3.9% and exports fell 2.1%, curbing growth. By economic activity, the electricity, gas and water supply sector fell 9.2%, the biggest drop, followed by construction (-5%), manufacturing (-1.5%), transportation (-1.2%), and wholesale and retail and accommodation and food services (-0.6%). In contrast, agriculture, forestry and fisheries (4.6%), health care and social welfare (4.2%), and finance and insurance (2%) posted growth.