South Korea’s Economy Accelerates as Domestic Demand Drives Recovery

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South Korea’s economy expanded by 1.2% in the third quarter of 2025, its fastest pace in 18 months, fueled by a rebound in private consumption and resilient domestic demand. The figures, released Tuesday by the Bank of Korea (BOK), signal that Asia’s fourth-largest economy is gradually recovering after a sluggish first half of the year.

According to the central bank, real GDP grew 1.2% quarter-on-quarter, surpassing its earlier forecast of 1.1%. The stronger-than-expected growth highlights the role of local spending in offsetting external challenges such as weak exports and persistent global interest rate uncertainty.

Private consumption surged 1.3% on-quarter, the sharpest increase since late 2022, contributing 0.8 percentage points to overall GDP growth. The rebound was supported by improved consumer sentiment, targeted fiscal measures, and seasonal factors such as new smartphone launches and a rise in medical spending following the return of trainee doctors.

Government expenditure also provided a boost, adding 0.4 percentage points to growth through welfare and public administration spending. Meanwhile, exports of semiconductors and automobiles remained steady, contributing modestly to net exports.

With the third-quarter expansion exceeding expectations, the BOK now anticipates that full-year growth could surpass the 1% mark, compared to its previous projection of 0.9%. Officials say even a mild fourth-quarter slowdown would not derail the country’s trajectory toward a full-year rebound.

Finance Minister Koo Yun-cheol credited the growth momentum to recovering consumption and investment, as well as fiscal stimulus through supplementary budgets. “This shift marks a clear transition from stagnation to recovery,” added Kim Jae-hoon, director of the Finance Ministry’s Economic Policy Bureau, underscoring renewed confidence in South Korea’s economic outlook.