Government Confident of 3% Growth Driven by Semiconductor Boom and Megaprojects... Strengthening Energy Self-Reliance [Q&A]

Economic Growth Strategy for the Second Half of 2026

The government cited the semiconductor boom, expanding exports, and improved corporate investment sentiment as the main reasons for sharply raising this year's economic growth outlook from 2.0% to 3.0%. In addition, the government announced plans to promote an energy and supply chain autonomy strategy focused on expanding domestic production, strategic stockpiling, and diversifying supply chains in response to instability in the Middle East. The government also plans to create more than 200,000 jobs for young people by 2030.

The following is a summary of key questions and answers with Lee Hyeongil, the 1st Vice Minister of Economy and Finance, and other senior government officials.

-What is the fundamental direction of the government's supply chain and energy self-reliance strategy in light of the war in the Middle East?

▲ (Lee Hyeongil, the 1st Vice Minister of Economy and Finance) Basically, we are approaching this from four directions. First, we will support the domestic production of any item that can be produced in Korea to the maximum extent possible. To this end, we plan to introduce a domestic production tax credit. Second, for items that are difficult to produce domestically, we will expand strategic stockpiling. Through this situation, we have realized not only the importance of crude oil but also of naphtha. However, as naphtha is highly volatile and difficult to store long-term, we will closely review whether it is more effective to stockpile crude oil, to store naphtha, or to use condensate as a substitute for naphtha.

The third direction is building overseas supply chain bases. We will actively pursue investment in overseas production bases and supply chains using the sovereign wealth fund and various domestic policy financing sources. Finally, we aim to diversify our supply chains. Currently, domestic oil refining facilities are optimized for Middle Eastern crude oil. Moving forward, we will expand research and development (R&D) investments to enhance our facilities’ capabilities to process crude oil from a variety of countries and reduce dependence on the Middle East.

President Lee Jae-myung is speaking at a Cabinet meeting held at the Blue House on the 14th. Photo by Blue House Press Photographers Group Yonhap News Agency

-The government's '3·4·5 Vision' seems to be premised on a continued supercycle for semiconductors. Is that correct?

▲ (Vice Minister Lee) We also acknowledge that the '3·4·5 Vision' is a very ambitious goal. However, we do not consider the semiconductor boom as merely a cyclical event. The government is planning to use this opportunity to implement three major megaprojects. In the United States, large-scale IT investments in the late 1990s led to a rebound in potential growth rates. Investment comes first, and its effects on productivity gradually spread across the entire economy, raising total factor productivity. We are considering a similar strategy. By capitalizing on the opportunities arising from the semiconductor boom and making large-scale investments, the investments themselves will drive up the growth rate, and as a result, productivity innovations in physical AI, robotics, automobiles, defense, space, and other industries will spread. Consequently, we expect total factor productivity and potential growth rates to increase together. Several global investment banks (IBs) have already reflected this possibility by raising their medium and long-term growth forecasts for our economy. While the goal is challenging, it is well worth pursuing, and we will steadily implement these policies during President Lee Jaemyung’s term in office.

-Since private-sector investment is at the core of the three major megaprojects, what support or risk-sharing measures does the government plan to provide?

▲ (Kang Giryong, Assistant Vice Minister of Economy and Finance) The main driving force behind this year’s 3% growth rate and 12.3% nominal growth rate is private-sector investment. The government will play a catalyst role in promoting private investment. First, through the National Growth Fund being promoted by the Financial Services Commission, we plan to support more than 15 trillion won in investment in the second half of the year. In addition, the upcoming tax support measures and next year's budget bill will also include various fiscal supports to back private-sector investment.

-There has been criticism that support for SMEs and small business owners, compared to advanced industries, is focused mainly on financial support. What is your response?

▲ (Min Kyungseol, Director General for Innovation and Growth, Ministry of Economy and Finance) It is not simply a matter of expanding loans. We plan to subdivide SMEs by growth stage and provide more focused support to those with higher growth potential. Instead of discontinuing support once a company graduates from SME status, we will restructure the support system so that growing companies can successfully transition to become mid-sized enterprises. Specific support plans will be announced in the second half of the year after consultations with relevant ministries.

-How will the plan to create more than 200,000 jobs by 2030 be implemented? What level of performance do you expect this year?

▲ (Assistant Vice Minister Kang Giryong) Although the growth rate has increased significantly, the semiconductor industry’s employment inducement coefficient is not high. Taking this into account, we have revised this year's employment growth outlook down by 10,000 people compared to previous forecasts. Recently, the number of employed persons has turned to a decreasing trend, and the working-age population is also shrinking, so employment conditions in the second half will likely remain challenging. However, if the foundations are laid for investment in the three major megaprojects and promising industries, we believe more than 200,000 jobs, including for young people, can be created by 2030. More than half of these will be quality positions directly linked to private-sector employment, rather than internships or short-term work experience. In the public sector, we also plan to create over 100,000 jobs for young people across various fields such as Youth New Deal, social solidarity economy, welfare, and national tax delinquency management. We plan to announce these details in the 'Youth Job Recovery Plan' in early Q3.

-Why did the government decide to shift the focus to the Korea Investment Corporation (KIC) instead of creating a new sovereign wealth fund?

▲ (Min Kyungseol, Director General for Innovation and Growth, Ministry of Economy and Finance) The government did consider setting up a new sovereign wealth fund, but after receiving feedback from domestic and foreign experts and internal discussions, we concluded it would be more efficient to utilize KIC, which has accumulated twenty years of operational experience and expertise. KIC has sufficient overseas networks and investment experience, so expanding its investment areas based on these strengths is viewed as realistic.

-The government expects per capita GNI to approach 40,000 dollars this year. How likely is this to be achieved?

▲ (Assistant Vice Minister Kang Giryong) The most important variables are economic growth and the exchange rate. Since we forecast a 12.3% nominal growth rate this year, the outlook is positive in terms of growth. However, as the exchange rate has remained high, if this situation persists, achieving 40,000 dollars will not be easy.

Even so, we expect to reach a level very close to 40,000 dollars. If the exchange rate stabilizes going forward, the goal should be attainable.

(Yoo Byeonghee, Director General for Economic Policy, Ministry of Economy and Finance) The growth outlook contains both upside and downside factors. On the upside, there is the semiconductor market. Recently, major institutions have continued to upgrade their semiconductor forecasts; if the market performs better than anticipated in the second half, the growth rate could rise further. On the downside, conditions in the Middle East pose a risk. The current outlook assumes a certain degree of stability in the region. If Middle East risks escalate again, it could have a negative impact on growth. Based on the current exchange rate, this year's GNI is expected to be in the mid-39,000 dollar range. However, if growth improves or the exchange rate stabilizes, the possibility of reaching 40,000 dollars remains fully open.

This content was produced with the assistance of AI translation services.