Ministry of Trade, Industry and Energy: Q1 2025 Foreign Direct Investment
Reported Amount Down 9.2% to $6.41 Billion
M&A Investment Plunges 45%
Foreign direct investment (FDI) in the first quarter of this year decreased by more than 9%, marking a decline for the first time in six years since 2019. The government attributes the reduction in investment in Korea to increased global uncertainties, including the tariff policies of former U.S. President Donald Trump.
According to the '2025 Q1 FDI' report released by the Ministry of Trade, Industry and Energy on the 3rd, the reported amount was $6.41 billion, down 9.2% compared to the same period last year. This is the first decline in Q1 FDI since 2019 (-35.7%). On an arrival basis, it recorded $3.51 billion, an increase of 26.4%.
An official from the Ministry of Trade, Industry and Energy explained, "The slight decrease in Q1 FDI reported results is estimated to be due to intensified investment wait-and-see sentiment amid domestic and international economic uncertainties such as the second term of Trump's tariff policies, and a decrease in dollar-denominated investment amounts caused by the depreciation of the Korean won. Additionally, the record high performance in Q1 last year ($5.63 billion) also reflects a base effect."
Greenfield investments for new and expanded factories in Q1 this year increased by 20.7% year-on-year to $4.606 billion, while mergers and acquisitions (M&A) investments amounted to $1.74 billion, down 45.4%.
By country, investment from the United States increased to $830 million (+15.0%) based on reported amounts. Investment from China sharply decreased to $330 million (-75.0%). Investment reports from the European Union (EU) rose to $1.49 billion (+163.6%), and investment from Japan also increased to $1.23 billion (+8.6%).
Investment reported in the manufacturing sector totaled $2.33 billion, down 24.5% year-on-year. Investment in the service sector also decreased by 7.4% to $3.56 billion.
The government stated that "it is difficult to predict the overall foreign direct investment situation for the year based solely on Q1 results." A ministry official said, "Although Q1 results this year declined compared to last year, excluding last year, it is the second highest on record, demonstrating that foreign investors maintain confidence in the fundamentals of the Korean economy. We will significantly strengthen foreign investment incentives to expand investment momentum, improve the foreign investment environment in line with global standards, and carry out strategic outreach to expand foreign investment, doing our best until the end of the year."
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