[Government Economic Policy Responses and Achievements since Its Inauguration]
▶ From the outset of the administration, the government devoted all-out efforts to restoring the faltering economic recovery and securing growth momentum.
º Activated the Emergency Economic Review Task Force chaired by the President on the first day of the administration (June 4), and submitted the second supplementary budget proposal to the National Assembly within 20 days (June); formulated the New Government Economic Growth Strategy aimed at “Genuine Growth” (August).
º Concluded tariff negotiations with the U.S. in October, placing the national interest first, thereby easing export-related uncertainties and strengthening the foundation for Korean companies’ entry into the U.S. market.
º Normalized tax policy, including restoring the corporate income tax rate to its 2022 level, to bolster the weakened revenue base (December).
º Laid the groundwork for a virtuous cycle of “active fiscal policy → enhanced performance → economic growth → sustainable public finances” through the performance-oriented 2026 budget (December 2), featuring concentrated investment in AI and emerging industries as well as record-high expenditure restructuring.
▶ The government achieved tangible outcomes, including an economic rebound, record-high stock market levels, and a recovery in people’s livelihoods.
º (Economic Activity) In the third quarter of 2025 – the new administration’s first full economic report card – the economy grew by 1.3%, the highest in 15 quarters, while exports surpassed $700 billion for the first time on record → economic growth for 2025 projected at 1.0%.
º (Stock Market) Driven by policy measures such as amendments to the Commercial Act and the one-strike-out rule against unfair trading, the KOSPI surpassed the 4,000 mark for the first time ever and has continued to rise, recording the highest gain among major economies.
º (People’s Livelihoods) On the back of the supplementary budget, including consumption coupons, domestic demand recovered, leading to an expansion in employment growth, particularly in services sectors closely linked to domestic demand.
[Economic Outlook]
In 2026, the Korean economy is expected to see a broadening recovery, supported by improvements in domestic demand and strong performance in the semiconductor sector; however, structural challenges – including a declining potential growth rate and widening polarization – remain.
1) (Macroeconomy) Economic growth is project at 2.0% in 2026, led by improved consumption and easing weakness in construction, while inflation is expected to rise by 2.1% in 2026, as upside pressures from stronger domestic demand are offset by declining global oil prices. However, risks remain latent, such as uncertainties in the foreign exchange and real estate markets, household debt, and MG Community Credit Cooperatives.
2) (Potential Growth Rate) Potential growth rate continues to decrease due to population contraction, subdued investment, and stagnant productivity. If current trends persist, it is projected to fall to around 1% in the 2030s and into the 0% range in the 2040s.
3) (Economic Polarization) With growth concentrated in large firms and the IT sector, income and asset polarization has deepened due to unfair trade practices between large firms and small and medium-sized enterprises (SMEs), a dual structure in the labor market, and deepening regional disparities. These factors are expected to weigh on growth by hindering human capital formation, lowering the birth rate, and weakening the domestic demand base.
[2026 Economic Growth Strategy]
Amid internal and external challenges, the government will pursue a fundamental transformation of the growth paradigm to revive potential growth and address polarization, thereby realizing a major economic leap forward in which all citizens can grow together alongside national growth.
①Externally, the government will proactively respond to the reshaping of the global economic order driven by industrial mega-transformations – AI transformation (AX) and green transformation (GX), China’s technological catch-up, rising economic nationalism, and value chain disruptions.
②Domestically, it will reduce inequality and gaps, break the vicious cycle of competition and conflict, and achieve inclusive, sustainable, and innovation-led growth.
Ultimately, the government has formulated the 2026 Economic Growth Strategy, centered on flagship initiatives, with a view to setting 2026 as the inaugural year of a major economic leap forward for the Korean economy.
The following are the 15 key initiatives across four strategic pillars of the 2026 Economic Growth Strategy:
I. Proactive Macroeconomic Management
i. Economic Revitalization
- Implement an expansionary fiscal policy with total government expenditure rising by 8.1% in 2026, increase investments by public institutions and policy financing by KRW 20 trillion, and put in place measures to stimulate private investment.
- Step up sector-specific efforts to boost consumption, investment, and exports.
ii. Price Stability
- Mobilize whole-of-government efforts to stabilize living costs, including food prices, and ease household burdens.
iii. Risk Management
- Mitigate volatility in the foreign exchange market and address structural supply-demand imbalances.
- Stabilize the real estate market through accelerated housing supply and effective supply and demand management.
- Ensure stable financial market management, including aggregate household debt management and the orderly restructuring of real estate project financing (PF).
II. Restoring Potential Growth
i. Developing National Strategic Industries
- Expand and diversify growth engines by further advancing semiconductors and other strategic industries.
① Advance Korean semiconductors to a top-two global powerhouse. (Manufacturing + Fabless)
② Nurture new growth engines, including defense, biotechnology, and K-culture industries
- Reinforce the competitiveness of petrochemical and steel industries through a transition to low-carbon, high-value-added production and innovation in manufacturing processes.
ii. Realizing an Ultra-Innovative Economy
- Achieve a top three global AI power through a comprehensive AI transformation across infrastructure and technology, industry, and talent.
① Build AI innovation infrastructure through the development of an “AI Highway” and the securing of core AI technologies.
② With the goal of becoming the world’s leading nation in Physical AI, provide focused support for seven strategic leading fields through industry-academia-research collaboration.
③ Gradually expand three leading public AX initiatives, starting with high-demand services.
④ Establish an AI basic society through nationwide Korean-language AI adaptation.
- Drive the green transformation (GX) by accelerating greenhouse gas reductions and expanding the supply of renewable energy.
- Deliver tangible outcomes from the 15 flagship projects of the Ultra-Innovative Economy initiative.
- Scale up R&D investment and upgrade R&D toward mission-oriented and challenge-driven approaches to address national priorities.
- Institutionalize and utilize digital assets.
- Develop a master plan aimed at achieving a major economic leap forward for the Korean economy.
iii. Strategic Global Economic Cooperation
- Capitalize on investment in the U.S. to expand market access, deepen cooperation, and strengthen industrial capabilities.
- Adapt to the changing trade environment by enhancing large-scale strategic economic cooperation support and establishing country-specific market entry strategies.
- Bolster economic security by expanding domestic production, stabilizing supply chains, securing critical minerals, and responding to export controls.
iv. Productive Finance
- Transform capital flows through support for high-tech industries and long-term domestic equity investment, while broadening global demand.
① Accelerate financial support for high-tech industries by fully rolling out the National Growth Fund and revitalizing financing channels.
② Realize the Korea Premium by promoting long-term investment in domestic equities and establishing a fair market order.
③ Develop a roadmap for KRW internalization and pursue inclusion in the MSCI Developed Markets Index.
v. Maximizing Human Capital
- Cultivate domestic high-skilled talent in science, engineering and AI.
- Step up efforts to address low fertility by establishing a national demographic response framework and improving work-family balance and childrearing support.
- Mitigate the decline in the working-age population through strategic deployment of foreign workers and enhanced rights protection.
III. Inclusive and Balanced Growth and Reduction in Economic Inequality
i. Locally Driven Growth
- Generate tangible outcomes by transforming the capital region’s single pole structure into a five-poles-and-three-specialized-regions framework.
① Boost growth potential through regional industrial development, AX advancement, infrastructure expansion, and higher education reform.
② Provide regional investment packages and stimulate consumption.
③ Institutionalize regionally differentiated and preferential support across fiscal, tax, financial, and procurement policies.
④ Promote self-sustaining regional economic revitalization by reinforcing the social and solidarity economy.
ii. Inclusive Growth
- (SMEs) Stimulate SMEs growth by building a fair and mutually beneficial growth ecosystem.
① Advance win-win growth between large enterprises and SMEs by feeding back the gains from economic diplomacy and expand SMEs’ global market entry.
② Enhance redress mechanisms for unfair trade practices and prevent technology theft to establish a fair trade order.
- (Ventures / Startups) Expand support for ventures and startups and foster a failure-tolerant startup ecosystem that enables business re-entry after setbacks.
① Expand venture and startup support through stage-specific tax incentives and revitalization of the KOSDAQ market.
② Develop a second-chance entrepreneurship ecosystem tailored to different business stages.
- (Small businesses) Strengthen small businesses’ capabilities with tailored practical R&D and assist in crisis recovery and business restart.
- (Youth) Boost employment, promote asset formation, provide cost-of-living relief, and enhance financial support.
- (Middle-aged and older adults) Lay the foundations for old-age income security through job expansion and multi-layered income protection.
- (Low- and middle-income households) Bolster support for vulnerable groups by scaling up financial assistance and consumer protection and reinforcing basic social security.
① Promote inclusive finance via interest rate cuts and safeguard financial consumers.
② Bolster minimum living guarantees for low-income households and minimize welfare blind spots.
iii. Safety-Centered Sustainable Growth
- Improve industrial safety management by expanding safety investment incentives and reinforcing accountability, enforcement, and supervision.
- Reduce labor market polarization by ensuring fair compensation and protecting the rights of all workers.
iv. Attractive Growth Powered by Culture
- Foster Korean culture as a core growth engine and accelerate reaching 30 million inbound tourists.
IV. Strengthening the Foundations for a Major Economic Leap
i. Regulatory Reform
- Improve regulations for high-tech industries and ease regulatory constraints on emerging industries, including promoting data sharing and utilization.
- Comprehensively review firm-size-based regulations to facilitate corporate investment and growth, including measures to mitigate support gaps in policy programs.
- Swiftly advance the rationalization of economic penalties by setting a 30% improvement target and developing quarterly implementation plans.
ii. Proactive National Wealth Creation
- Establish a Korean-style sovereign wealth fund, improve government property governance and bolster government bond management.
iii. Fiscal Structural Reform
- (Fiscal) Implement performance-oriented fiscal management through reforms in fiscal operations and expenditure structures.
- (Taxation) Expand the revenue base by tightening tax arrears management and streamlining tax exemptions and deductions.
- (Public procurement) Innovate procurement administration by scaling up innovative procurement, preventing abnormally low bids, and reforming the advance payment system.
- (Public sector) Enhance productivity and public value, with functional reform of public institutions and their strengthened role as model employers.
Please refer to the attached files.
