South Korean GDP Shrank In Fourth Quarter As Fiscal Stimulus Fades

2026-01-22 03:51:00 ET

By Min Joo Kang, Senior Economist, South Korea and Japan

Downside surprise came from the contraction of exports and investment

We previously projected fourth-quarter South Korean GDP growth to slow to 0.4% quarter-on-quarter, seasonally adjusted, as fiscal stimulus waned even as strong chip exports likely supported overall export growth. Today's data showed that the economy contracted instead. The slowdown in consumption growth was in line with our expectations. But declines in investment and exports diverged from our estimates. Weak GDP exports likely indicate that robust chip exports are driven by higher prices, while auto and machinery exports in real terms dropped due to tariffs and weak global demand. For investment, transportation equipment investment declined sharply, partially offset by IT investment growth....

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