South Korea avoided an economic recession when the economy recorded economic growth of 0.6 percent in the second quarter of 2025 without recording a recession.

 Advance reading, as given by the Bank of Korea, reported an improvement in the stronger-than-anticipated measure in the second quarter following the 0.2 percent dip in the previous quarter. The growth was ahead of economists’ expectations and an indication of continued vigor in times of international turbulence.

The GDP increased by 0.6 percent quarter on quarter, 0.5 percent year on year, and 0.5 percent at an increasing rate compared to 0 percent in the first quarter. Yet, despite all those external strains, the economy of South Korea experienced some minor but significant improvements.

Consumption and Public Spending Support Growth

The second quarter’s expansion was anchored by domestic demand. Final consumption outlays increased 0.7 percentage points, countering the previous quarter’s increase of 0.1 percentage points. Private consumption growth amounted to 0.5% due to the higher spending level on cars, entertainment, and sports.

A stable job market and inflation were in control, which boosted consumer sentiment. Government expenditures increased by 1.2 percent, and this was backed up by increased health-related spending in government consumption. Governments maintained defined policies to assure cost-of-living pressures, predominantly for low-income families.

The Bank of Korea is keen on maintaining consistent internal demand to cushion the economy against external shocks. It even hinted at moderate inflation as a tool that can aid growth in subsequent quarters.

Exports Recover Ahead of Key US Deadline

Goods and service exports increased 4.2 percent in Q2, which also showed a sharp turn since trade concerns were ongoing. Petroleum and chemical exports came second, as semiconductor shipments led the gains. The demand for memory chips improved after an extended decline that had started in 2023.

This is an export muscle that precedes a big deadline with the United States. As of August 1, a new 25 percent tariff applies on South Korean goods unless the trade accord is reached. The US is the second biggest receiver of South Korea’s exports, so the situation is very sensitive.

The negotiations have hit a snag due to South Korea’s inability to liberalize its agricultural sectors and accept more US beef and rice products. Although there is less time between them, the threat is still significant for huge industries like electronics and cars.

Economic Outlook Stays Cautiously Positive

Although the world economy was weak and demand uncertain in China, South Korea’s economy proved resilient in Q2. The slowdown was avoided through favorable fiscal measures and steady consumption. However, the future is still not clear in the next few months, considering trade tensions in the offing.

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