Korea posts worst Q1 growth among major economies

South Korea’s economy was the worst-performing among 19 major countries with available data, held back by its demographic challenges, according to data released Sunday by the Bank of Korea.

Data from the central bank’s Economic Statistics System, based on figures from the OECD, showed that the country’s real gross domestic product — a key indicator of economic growth — contracted by 0.246 percent in the January-March period.

This 0.246 percent contraction was the poorest economic performance among the 19 countries that have released first-quarter data. Of these, 18, excluding China, are members of the OECD.

Ireland posted the highest GDP growth in the first quarter at 3.219 percent, followed by China (1.2 percent), Indonesia (1.124 percent) and Spain (0.568 percent).

Canada’s GDP expanded by 0.4 percent, Italy by 0.26 percent, Germany by 0.211 percent and France by 0.127 percent during the same period.

Aside from Korea, only Hungary and the United States recorded economic contractions in the first quarter, shrinking by 0.152 percent and 0.069 percent, respectively.

In late April, the BOK had announced that Korea’s economy shrank by 0.2 percent in the first quarter based on preliminary data. The 0.046 percentage point gap between the BOK and OECD figures stems from differences in statistical timeframes. The BOK is expected to release a revised figure in June.

Meanwhile, Korea continues to suffer from a chronic economic slowdown driven by weak domestic consumption and sluggish exports.

Real economic growth has remained below 1 percent for four consecutive quarters. The economy grew just 0.1 percent in both the third and fourth quarters of 2024, following a 0.2 percent contraction in the second quarter, according to the BOK.

The Korea Development Institute recently forecast the country’s potential growth rate, the maximum rate at which the economy can grow without fueling inflation, to drop to 1.8 percent this year. That figure is lower than the BOK’s estimate of 2 percent.

In a report issued Thursday, the state-run think tank projected Korea’s potential growth rate would remain at the 1.5 percent level until 2030 — a downward revision of 0.4 percentage point from its 2022 forecast.

Looking further ahead, the KDI expects Korea’s potential growth rate to fall to 0.7 percent in the 2030s and just 0.1 percent in the 2040s, citing demographic shifts such as population aging as a key factor.

“To address this structural slowdown, it is necessary to focus national capacity on boosting total factor productivity,” the report said, referring to an economy’s efficiency in generating output from inputs.