South Korea's real gross domestic product (GDP) declined 0.2% in the first quarter of 2025 compared with the previous quarter, weighed down by contractions in manufacturing, construction, and services sectors, data from Statistics Korea showed Thursday.

Manufacturing output fell 0.6%, largely due to decreases in chemicals and machinery production.

Construction shrank 0.4%, driven by a drop in building construction activity. Services dipped 0.2%, with declines in transportation and real estate offsetting gains in finance and information technology.

Private consumption decreased 0.1% as spending on recreational and cultural services fell, despite an increase in goods purchases including communication equipment.

Government consumption remained steady from the previous quarter.

Investment in construction dropped 3.1%, while facilities investment declined 0.4%, impacted by lower demand for machinery such as semiconductor manufacturing equipment.

Exports fell 0.6%, primarily due to lower shipments of chemicals and machinery, while imports decreased 1.1%, led by reduced energy imports including crude oil and natural gas.

Meanwhile, real gross national income (GNI) rose 0.1%, showing a slight improvement despite the GDP contraction.

ING Research said a more stable domestic political environment is expected to support improved sentiment and growth over time.

However, they noted that U.S. tariffs are beginning to weigh on manufacturing and exports, especially in the automotive sector.