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Korea's economy shows signs of improvement amid challenges in exports and construction

Published: 09 Nov. 2025, 11:00

Shoppers purchase goods at a supermarket in Seoul on Nov. 3. [NEWS1]

After months of faltering growth, Korea’s economy is stirring again, helped by a burst of consumer spending that has offset weakening exports and a stagnant construction sector.

But the government’s think tank, the Korea Development Institute (KDI), cautioned on Sunday that the improvement may prove fleeting as trade tensions and real estate troubles continue to weigh on Asia’s fourth-largest economy.

"The economy is showing modest improvement, led by consumption, despite sluggish construction investment and a slowdown in export growth," the KDI said in its latest economics trends report.

Industrial production rose 6.7 percent in September from a year earlier, a sharp turnaround from a 0.4 percent drop in August, according to the National Data Office. Officials attributed much of the gain to higher consumer spending following the government’s consumer voucher program. A shift in the Chuseok harvest holiday, which added four working days this September compared to last year, also helped lift output.

But the underlying weaknesses remain. KDI warned that the recovery in construction and exports — key pillars of Korea’s economy — has yet to take hold.

“While the semiconductor sector continues to perform well, the negative impact of U.S. tariff hikes is spreading, dampening export growth, and the weakness in construction investment persists,” the institute said.

Construction investment shrank for a third consecutive quarter, falling 3.1 percent in the first quarter, 1.2 percent in the second, and 0.1 percent in the third. KDI noted that the slower pace of decline was largely due to temporary factors such as more working days and a concentration of finishing work.

"Project financing loan risks and a slump in regional property markets are preventing new orders from smoothly moving to construction starts, while extended project durations are sustaining the downturn in construction investment," KDI added.

Trade containers are stacked and cars lined up at Pyeongtaek Port in Gyeonggi on Nov. 6. [NEWS1]

Exports, another key driver of growth, have also cooled. The Ministry of Trade, Industry and Energy reported that exports in October rose 3.6 percent from a year earlier, down sharply from 12.6 percent in September.

The weeklong Chuseok break contributed to the slowdown, but even after adjusting for working days, average daily exports in September and October grew only 3.2 percent, compared to 5.7 percent in August.

KDI said that chips and ships continued to perform well, with daily export values up 18 percent and 64.4 percent, respectively, in September and October.

But most other goods remained "weak." Excluding those two sectors, exports fell 3.2 percent year-on-year in July, 2.5 percent in August and 4.6 percent in September–October.

A rebound led by exports, KDI concluded, is far from certain.

“Although trade conditions have improved somewhat with progress in the Korea–U.S. trade agreement and easing tensions between the United States and China, uncertainty still lingers,” the report said.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY AHN HYO-SEONG [[email protected]]