Seoul: The government on Friday rolled out an ambitious set of policy initiatives aimed at propelling South Korea toward a "great economic leap." This strategic plan is designed to position the nation as a global leader in key industries and to set the economy on a path toward a rebound in its potential growth rate, with a projected real GDP expansion of 2 percent for this year and an economic resurgence anticipated in 2026.
According to Yonhap News Agency, the Ministry of Economy and Finance emphasized the importance of this master plan as a foundation for significant economic advancement. Choi Si-hoon, an official from the ministry, highlighted that the government would implement a broad array of policy initiatives to accomplish these goals.
The government has outlined four primary policy directions to shift the nation's growth paradigm fundamentally. The first involves bolstering potential growth by investing in strategic national industries, aligned with the Lee Jee Myung administration's five-year economic blueprint to construct a "super-innovation economy." This includes significant investments in strategic industries, enhancing economic cooperation, and supporting these endeavors through productive finance and human capital development.
A key initiative under this plan is advancing South Korea's position as the world's second-largest semiconductor powerhouse. To achieve this, a special committee under the presidential office will be established to enhance the global competitiveness of the semiconductor sector. The government also aims to elevate its defense industry to be among the top four globally, nurture the biotechnology sector, and strengthen core industries like petrochemicals and steel. Additionally, there is a focus on making South Korea one of the top three global artificial intelligence leaders through comprehensive transformations in infrastructure, technology, industry, and human resources.
The second policy direction involves proactive management of macroeconomic conditions by stimulating growth, stabilizing consumer prices, and addressing potential risks. First Vice Finance Minister Lee Hyoung-il stated that the government would maintain price stability while managing risks in the foreign exchange, real estate, and financial markets. The government plans to tackle heightened volatility in the FX market by curbing fluctuations and resolving structural imbalances.
The third direction focuses on addressing structural challenges by promoting balanced growth and reducing polarization. President Lee has committed to strengthening regional development by expanding budgetary support for areas outside the capital region.
The final policy direction centers on reinforcing the foundation for substantial economic growth through regulatory reforms and proactive measures to expand national wealth. The government projects a 2 percent economic growth rate this year, supported by domestic demand improvements and robust semiconductor exports. This outlook is more optimistic compared to the Bank of Korea's 1.8 percent forecast and other international financial institutions, though slightly below the OECD's 2.1 percent prediction.
The government attributes this optimism to strong semiconductor exports amid a favorable industry upcycle, with global semiconductor sales showing significant increases. Domestic demand is expected to rise following last year's recovery, with private consumption projected to grow by 1.7 percent this year. This growth is supported by improved consumer sentiment and government measures, including cash handouts and supplementary budgets.
The 2026 government budget of 727.9 trillion won (approximately US$500.6 billion) and the effects of interest rate cuts are anticipated to bolster consumption further. The government has shifted from the previous administration's tight fiscal stance to an expansionary fiscal policy with an 8.1 percent increase in spending.
Construction investment, which saw a decline last year, is expected to rebound with a 2.4 percent growth in 2026. However, the labor market recovery is projected to be slow, with employment expected to rise by 160,000 this year, down from 190,000 last year. The slowdown is attributed to a shrinking working-age population and rapid aging. Employment losses in construction are expected to decrease significantly, with modest gains in manufacturing.