SEOUL- South Korea’s economy unexpectedly contracted in the first quarter as exports and consumption stalled amid fears over the impact of Washington’s aggressive tariffs, fanning expectations of more interest rate cuts.
Gross domestic product (GDP) contracted 0.2 percent from a quarter earlier on a seasonally adjusted basis, shrinking for the first time since the second quarter of 2024 and missing forecasts for a gain of 0.1 percent in a Reuters survey.
The weak data will increase calls for the Bank of Korea to cut interest rates again as soon as next month as policymakers worry about the consequences of Trump’s tariff policies, which some analysts fear may tip one of the world’s most trade-reliant economies into a downward spiral.
“Industrial output all across was sluggish in the first quarter along with consumption, and exports began to be a drag on growth amid external uncertainties,” said Huh Jae-hywan, an analyst at Eugene Investment & Securities, who correctly foresaw the economy would contract 0.2 percent in the first quarter.
