Seoul: South Korea posted the lowest economic growth rate among 19 major economies in the first quarter. The nation's real gross domestic product shrank by 0.246 percent from the previous quarter, according to the Bank of Korea. This unexpected negative growth contrasts with the central bank's forecast of a 0.2 percent increase. The downturn places South Korea at the bottom among major economies, including the United States, Canada, France, Germany, and China.
According to Yonhap News Agency, while the US economy also recorded negative growth, it was a minor contraction of 0.069 percent. Japan and the United Kingdom have yet to disclose their figures, but their growth is anticipated to surpass South Korea's performance. The country has experienced four consecutive quarters of growth below 1 percent since the second quarter of 2024, indicating a pattern of structural stagnation. The government anticipates that its 13.8 trillion won ($9.87 billion) extra budget will boost growth, though only by a modest 0.1 percentage point annually.
Several factors contribute to South Korea's economic decline. Export barriers have hindered a crucial economic driver, while efforts to develop new growth industries have fallen short. Some businesses have relocated for more favorable investment conditions. The downturn in domestic demand exacerbates the situation, with consumers burdened by high inflation and rising household debt.
The political landscape further complicates economic recovery. President Yoon Suk Yeol's martial law declaration and subsequent impeachment have created a leadership vacuum. Additionally, tariffs imposed by the Trump administration have disrupted the economy. As South Korea grapples with these challenges, its national debt continues to rise. According to the International Monetary Fund, the country's government debt-to-GDP ratio is expected to reach 54.5 percent this year, surpassing the average for other advanced nonreserve currency countries.
The rapid increase in government expenditures post-COVID-19 has significantly driven this surge in debt. Without intervention, the debt ratio is projected to near 60 percent by 2030. Politically motivated spending that wastes public resources must be curtailed, and measures to revitalize the economy are urgently needed. Presidential candidates are urged to avoid populist promises and focus on realistic economic strategies.
Economic lobby groups, including the Korea Chamber of Commerce and Industry and the Federation of Korean Industries, have proposed 100 policy recommendations for the next government. These strategies address growth stimulation, industry development, and expansion of economic territories. Candidates must prioritize these proposals over populist pledges to navigate the nation out of low growth and heavy government debt.