South Korea’s Industrial Growth Stalls Amid Construction Slump
South Korea’s industrial production growth has hit its lowest point in five years, excluding the downturn experienced during the COVID-19 pandemic. While the semiconductor sector continues to thrive, stark disparities between it and other industries highlight a concerning K-shaped recovery trend. The construction industry, in particular, has faced significant challenges, contributing to a broader economic stagnation despite a temporary surge in the stock market.
Industrial Production Data Reveals Divergence
According to the National Data Office, South Korea’s overall industrial production index for 2025 reached 114.2, reflecting a modest increase of just 0.5 percent from the previous year. This growth marks the weakest performance since 2020, when industrial output fell by 1.1 percent due to the pandemic. The current figure represents only one-third of the 1.5 percent growth recorded in 2024, indicating a troubling trend for the nation’s economy.
The semiconductor industry remains a bright spot, with output rising by 13.2 percent. Additionally, other transportation sectors, including shipbuilding, saw a notable increase of 23.7 percent. These gains, however, stand in stark contrast to the construction sector, which experienced a dramatic 16.2 percent decline in output, measured by completed domestic projects. This divergence underscores the uneven recovery across different sectors of the economy.
Challenges Facing the U.S. Shipbuilding Industry Amid Growing Demands
Retail sales, another critical indicator of consumer demand, also showed limited growth, rising only 0.5 percent year-on-year. Although the introduction of consumption coupons in July 2025 helped to halt a three-year decline in retail activity, the overall increase remains modest. As South Korea grapples with these economic challenges, the stark contrasts between thriving and struggling sectors raise questions about the sustainability of the current recovery trajectory.
