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.

South Korean GDP contracted more than expected in the first three months of the year. Although the Bank of Korea flagged the possibility last week, the 0.2% quarter-on-quarter drop was a shock to the market in light of the BoK holding its key interest rate unchanged at its April meeting.

South Koreas economy unexpectedly shrank by 0.2% in Q1 2025, marking its first quarterly contraction since mid-2024, as exports and consumer spending faltered amid growing uncertainty over U.S. tariff hikes.