'Potential Growth Rebounds for First Time in 40 Years' Lee: "Focus Fiscal Resources on Youth Jobs, Housing Supply"

"Historic Turning Point for an Economic Leap"
"Concentrating the Fruits of Growth in Large Companies Would Undermine Growth Potential"
Closed-Door Meeting Discusses Expanding Public-Sector Jobs and Fair Wages
Calls for Stronger Financial Support for Ordinary People

On the 22nd, President Lee Jaemyung described the International Monetary Fund’s (IMF) forecast that South Korea’s potential growth rate would rebound for the second consecutive year as “a historic turning point for our economy.” However, he warned that the hard-won opportunity for a rebound could be lost if the benefits of growth do not spread to youth employment, domestic demand, small and medium-sized enterprises (SMEs), and other areas. He said the government would focus its fiscal and policy resources on youth employment, housing supply, and stimulating consumption, while overhauling the framework for win-win cooperation to promote shared growth between large companies and SMEs.

President Lee Jae-myung speaks at a meeting of senior secretaries and aides at the Blue House on Oct. 22, 2026. (Yonhap)

In his opening remarks at the 50th Presidential Senior Secretaries and Aides Meeting, which he chaired that day at the Blue House, President Lee said, “Amid rising public expectations that real growth will exceed 3% this year and national income will reach $40,000, the IMF has forecast that our potential growth rate will rise for the second consecutive year.”

“This is the first time in 40 years, since the mid-1980s, a period of rapid growth,” he said. “Unlike during the three-lows boom, this forecast comes amid unfavorable conditions such as high oil prices caused by the war in the Middle East and a global supply chain crisis, which makes it all the more significant.”

“The potential growth rate, which fell by nearly 1 percentage point whenever administrations 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 potential growth, but I knew it would not be an easy task. I am truly relieved that it is now trending upward thanks to the efforts of many people.”

Potential growth is 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 potential growth means that its capacity for medium- to long-term growth is improving.

President Lee also called for a policy shift to turn the rebound in potential growth into sustainable and balanced growth. “We need to further strengthen the competitiveness of advanced strategic industries such as artificial intelligence and semiconductors, and concentrate fiscal and policy resources on areas where recovery is lagging,” he said.

In particular, he pointed to imbalances in the economic structure, where export-led growth, weak domestic demand, and sluggish youth employment intersect. “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 weakening of the domestic demand base could squander the opportunity for a rebound in potential growth.”

“We must not leave these problems entirely to the market,” he said. “Please deploy the available fiscal resources as fully 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 resulting from rising interest rates. Referring to the possibility that the interest burden caused by rising benchmark and government bond rates could persist for a considerable period, President Lee said, “We must also strengthen support for financially vulnerable people.” He added, “We must actively develop and mobilize fiscal and policy measures to help the South Korean economy settle onto a new growth path.”

He also identified overhauling the industrial ecosystem to close the growth gap between large companies and SMEs as a key task. “If the fruits of growth are concentrated only among large companies, 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.”

“We need a new paradigm for win-win cooperation so that large companies and SMEs can grow together in a balanced way and drive growth in the national economy,” he said.

Specifically, he proposed expanding the existing framework for win-win cooperation, which has focused on manufacturing and construction, to include areas such as platforms and finance. He also instructed officials to develop tailored measures to promote cooperation between large companies and SMEs in national initiatives, including the three mega-projects and seven SEED projects currently being pursued by the government, as well as the three key social policies. “I ask all ministries to join forces so that every economic stakeholder can share in the new opportunity for a leap forward that our economy has encountered after a long time, and the public can feel its benefits,” President Lee said.

President Lee Jaemyung speaks at a meeting with senior secretaries and aides at the Blue House on the 22nd. 2026.10.22 Yonhap News

Meanwhile, ahead of the fourth anniversary of the Itaewon disaster and Halloween, President Lee ordered thorough preparations to prevent crowd-crush accidents. He urged officials to take particular care to ensure there are no gaps in safety management at densely attended events where there is no organizer or the organizer is unclear.

He also stressed the need to prevent wildfires in the fall and conduct special safety inspections of aging bridges, roads, buildings, and other infrastructure. “When it comes to public safety, doing too much is 100 times better than doing too little,” President Lee said. “Please also draw up more thorough safety measures for frontline responders, including firefighters and police officers.”

At the closed-door meeting that followed, participants discussed measures related to employment, everyday financial services, and housing support, focusing on the “three key social policies” reported on last week. In a written briefing, Kang Yujeong, senior spokesperson for the Blue House, said President Lee had described expanding productive public-sector jobs as “a fundamental policy direction of our government” and stressed the importance of exchanging views and working with local governments. He particularly noted the need to expand jobs for older people and called for the development of a variety of employment programs.

Regarding the three key social policies—the “National Jobs Project,” “Finance That Reaches Ordinary People,” and “Guaranteeing the Public’s Right to Housing”—President Lee also called for a differentiated approach based on the target population, timing, and circumstances. The aim, he said, is to move away from applying the same policy uniformly to everyone and instead carefully design the target groups, forms of support, and delivery methods. President Lee stressed that the government should consider who to provide what to, and how, and pursue policies suited to each situation.

He also raised the issue of reforming public-sector pay systems. President Lee asked whether “fair wages,” rather than minimum wages, should be made the norm in the public sector. He also checked on progress in reviewing the introduction of a fair pay allowance, which he had previously instructed the Ministry of Employment and Labor to consider.

On everyday financial services, he called for proactive preparations for rising loan interest rates. Expressing concern that higher rates could increase the cost of living for ordinary people, President Lee said, “The government must give ordinary people room to breathe and serve as their last line of support.” He also underscored the importance of “signature policies” that people can experience in their daily lives. “Every policy must be simple, fast, and bold,” he said, stressing the effectiveness of policies and the speed of their implementation.

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