SEOUL, Jan 22 : South Korea’s economy unexpectedly shrank in the final quarter of 2025, marking the biggest contraction in three years, advanced central bank estimates showed on Thursday.

Gross domestic product decreased 0.3 per cent in the October-December period from the preceding three months on a seasonally adjusted basis, compared with a median 0.1 per cent increase tipped in a Reuters poll of economists.

The economy contracted by the steepest pace since the fourth quarter of 2022, after expanding 1.3 per cent in the previous quarter.

Construction investment, down 3.9 per cent, was the biggest drag, while facility investment dropped 1.8 per cent. Private consumption rose 0.3 per cent, after expanding 1.3 per cent in the previous quarter on a boost from the government’s extra budget.

Exports fell 2.1 per cent and imports declined 1.7 per cent, bringing a net negative contribution of 0.2 per centage points.

The Bank of Korea last week signalled an end to its current easing cycle after keeping interest rates unchanged, prioritising foreign exchange stability as it flagged upside risk to this year’s economic growth.

On a year-on-year basis, GDP expanded 1.5 per cent in the fourth quarter, after rising 1.8 per cent in the third quarter, also missing economists’ expectations for a median 1.9 per cent increase.

Asia’s fourth-largest economy grew 1.0 per cent in 2025, after growing 2.0 per cent in 2024, marking the slowest annual growth since 2020, according to the BOK, which expects the economy to grow 1.8 per cent in 2026.

The government expects stronger growth of 2.0 per cent this year.