Potential Growth Rate Rebounds for First Time in 40 Years... Lee: "Growth Benefits Must Reach Youth and SMEs"

President Lee chairs meeting of senior secretaries and aides
"Focus fiscal resources on youth jobs, housing supply and boosting domestic demand"
"Concentrating the fruits of growth among large corporations undermines growth potential"
Emphasizes shared growth with SMEs

President Lee Jae Myung said on Oct. 22 that the International Monetary Fund’s (IMF) forecast that South Korea’s potential growth rate would rebound for a second consecutive year meant “our economy is reaching a historic turning point.” He cautioned, however, that the hard-won opportunity for growth could be lost if the benefits of economic growth did not extend to youth employment, domestic demand and small and medium-sized enterprises (SMEs). He called for fiscal and policy resources to be focused on youth employment, housing supply and boosting consumption, and for a comprehensive overhaul of the win-win cooperation system to promote shared growth between large corporations and SMEs.

President Lee Jaemyung speaks at a meeting of senior secretaries and aides at the Blue House on Oct. 22, 2026. Yonhap News.

In his opening remarks at a meeting of senior secretaries and aides that he chaired at the Blue House that day, President Lee said, “As public expectations rise for real growth of more than 3% this year and for per capita national income to reach $40,000, the IMF has forecast that our potential growth rate will rise for a second consecutive year.”

“This is the first time in 40 years, since the mid-1980s, when we were in a period of rapid growth,” President Lee said. “The forecast is all the more significant because it comes amid unfavorable conditions, such as high oil prices caused by the Middle East war and a global supply chain crisis, unlike during the three-lows boom.”

“The potential growth rate, which fell by nearly 1% each time the government changed, is reaching a historic turning point under our administration,” he said. “I have said several times that we would reverse the downward trend in the potential growth rate, but I knew it would not be an easy task. It is truly fortunate that, thanks to the efforts of many people, the rate is now on an upward trajectory.”

The potential growth rate refers to the level of growth a country can achieve by making full use of its economic resources, including labor, capital and productivity, without fueling inflation. As an indicator of an economy’s underlying strength, a rebound in the potential growth rate means that its medium- to long-term growth capacity is improving.

President Lee also called for a policy shift to turn the rebound in the potential growth rate into sustainable growth. “We must further strengthen the competitiveness of advanced strategic industries such as artificial intelligence and semiconductors, and focus fiscal and policy resources on areas where recovery has been slow,” he said.

He also pointed to imbalances in the economic structure, where export-led growth, weak domestic demand and a slowdown in youth employment are intertwined. “Even as the economy grows amid changes in the industrial structure, pathways to jobs for young people are narrowing, and the gap between exports and domestic demand is not closing,” President Lee said. “If these imbalances become entrenched, young people’s participation in economic activity could decline, and the opportunity to reverse the decline in the potential growth rate could be lost as the domestic demand base weakens.”

“We must not leave these issues entirely to the market,” he said, instructing officials to “provide sufficient fiscal resources, as needed, to expand youth employment, increase housing supply and stimulate domestic consumption.”

He also stressed the need to ease the burden on vulnerable groups as interest rates rise. Citing the possibility that the burden of higher interest rates resulting from increases in the benchmark rate and government bond yields could persist for a considerable period, President Lee said, “We must also step up support for financially vulnerable people.” He added, “We must actively develop and mobilize fiscal and policy measures so that the South Korean economy can settle onto a new growth trajectory.”

He also identified reforming the industrial ecosystem to narrow the growth gap between large corporations and SMEs as a key task. “If the fruits of growth are concentrated only among large corporations, disparities within the economy will widen, polarization will deepen, and the country’s growth potential will be undermined,” President Lee said. “Growth that leaves out SMEs, which account for more than 80% of all jobs, is neither sustainable nor desirable.”

President Lee emphasized that “we must fundamentally transform the paradigm of win-win cooperation so that large corporations and SMEs can grow together in a balanced way and drive the growth of the national economy.” Specifically, he proposed expanding the existing win-win cooperation system, which has focused on manufacturing and construction, to include areas such as platforms and finance. He also called for tailored measures to promote cooperation between large corporations and SMEs in national initiatives, including the government’s three mega-projects, seven SEED projects and three core social policies.

President Lee Jae-myung speaks during a meeting with senior secretaries and aides at Cheong Wa Dae on Oct. 22, 2026. (Yonhap News)

Meanwhile, President Lee ordered thorough preparations to prevent crowd-related accidents ahead of Halloween. He called for particular care to ensure there are no gaps in safety management at large gatherings where the event organizer is absent or unclear.

He also stressed the importance of preventing wildfires in the fall and conducting special safety inspections of aging bridges, roads and buildings. “When it comes to public safety, doing too much is 100 times better than doing too little,” President Lee said. “Please ensure that safety measures for frontline responders, including firefighters and police officers, are also developed more thoroughly.”

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