Slipping exports and construction spending tipped the South Korean economy into contraction in the fourth quarter, although for all of 2025 the nation's gross domestic product (GDP) still expanded.

South Korea's GDP declined 0.3% in the fourth quarter from the third, but was still up 1.5% from a year earlier, reported the Bank of Korea.

Full the full year 2025, the nation's GDP expanded by 1% on year, added the central bank.

In the fourth quarter, exports fell by 2.5% from the third period, while construction spending declined 3.9%, reported officials. Investment in facilities fell by 1.8% on quarter as well.

Despite the tempered fourth quarter, the GDP outlook for 2026 is still positive, said ING Think, an arm of the Dutch investment house.

"Although the 4Q25 growth was weaker than expected, we are keeping our 2026 GDP growth unchanged at 2.0% year on year. Stronger-than-expected chip demand is likely to boost exports and facility investment. After five years of contraction, the construction sector is expected to enter a cyclical recovery," said ING Think.

In its most recent forecast, made in November of last year, the Bank of Korea forecast 1.8% growth for the national economy in 2026.

In 2026, South Korea economy should benefit from robust exports, higher private consumption, a strong stock market and expanded welfare programs, "stringent housing regulations and a weak Korean won may temper overall optimism," advised ING Think.

South Korea's export picture may already be on the improve.

The nation's outbound shipments expanded 14.9% on year in the first 20 days of January, the Korea Customs Service reported on Wednesday.