South Korea's economy showed a 0.6% growth in Q2 2025 compared to the previous quarter, helping to avert a repeat technical recession.
GDP Growth and Avoiding Recession
The Bank of Korea's preliminary data showed that South Korea, the world's fourth-largest economy, grew by 0.6% in seasonally adjusted terms in Q2. This marked a significant improvement from a 0.2% decline in Q1. Economists polled by Reuters had expected 0.5% growth; however, actual figures surpassed these predictions, indicating ongoing strength despite international economic headwinds.
Consumer and Government Spending Dynamics
Final consumption expenditure rose by 0.7% in the quarter compared to -0.1% in Q1. Private consumption increased by 0.5%, boosted by higher vehicle purchases and spending on entertainment. Government spending grew even faster at 1.2%, primarily due to rising health benefit expenditures. The Bank of Korea noted that even modest domestic demand growth is vital for buoying the overarching economy amid external risks.
Exports and Trade Risks
In Q2, South Korea also experienced strong external export growth at 4.2%. The export of goods and services played a crucial role in overall economic expansion, especially amid complex global trading conditions. However, with an approaching critical trade deadline with the United States, which looms the potential of additional tariffs on Korean goods, the situation holds unpredictability. The South Korean government has stated it will not compromise on key agricultural demands in the negotiations with the US.
Latest data indicates that South Korea managed to avoid a technical recession due to growth in domestic consumption and exports, though international risks remain a significant concern.
