[Editorial] All-out Efforts Are Needed to Foster New Growth Engines and Pursue Structural Reform

At a State Council of South Korea meeting held at Cheong Wa Dae (The Blue House) on the 26th, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol reported to President Lee Jae Myung on the direction of the "2026 economic growth strategy." The plan calls for measures to minimize the impact of the Arab-Israeli conflict and strengthen the K-supply chain and energy security.
In the first half of this year, the South Korean economy delivered solid export growth despite the difficulties caused by the Arab-Israeli conflict, and that helped lift growth. The consensus forecast now is that full-year real GDP growth will reach the mid-2% range, higher than initially expected. Compared with the start of the year, when growth of only around 1% was anticipated, that is a welcome development.
However, it is important to note that the export rebound has come with a very high dependence on semiconductors. It is unclear how long demand tied to Artificial Intelligence (AI) will continue. If demand weakens, the economy could slow sharply. An economy that leans on a single semiconductor sector is by no means desirable.
For that reason, the outlook for the second half of the year is not entirely optimistic. The government must further flesh out the new growth engine and Ultra-Innovative Economy initiatives it envisioned earlier this year and produce visible results. Economic plans cannot remain mere words. Grand rhetoric may briefly please the public, but policies that cannot be measured in numbers are little more than an illusion. That is why structural reform has long been emphasized. Despite repeated calls for reform, little has actually been accomplished. Structural reform spans many areas, including labor, wages and pensions. Now that the Lee Jae-myung administration has been in office for a year, it must deliver concrete results. It is no time to rest on the fleeting gains brought by semiconductors.
Global competition in advanced industries such as AI and semiconductors is intensifying. China is pressing hard to catch up with Taiwan, South Korea and the United States. Japan's efforts to regain its former glory also cannot be ignored. If South Korea lets its guard down for even a moment, it could fall behind its rivals.
China's technological progress has already crossed the line from concern to alarm. It is now ahead of us. This is not limited to AI and semiconductors. Electric vehicles, backed by strong technology and price competitiveness, are sweeping into our market like a tsunami. Home appliances such as TVs, washing machines and refrigerators are also poised to overtake us soon. Both companies and the government must stay fully alert. Hyundai Motor Company's decision to dismantle Chinese cars to assess their technology shows that South Korea's auto industry is already in emergency mode.
Even if the Arab-Israeli conflict ends in the first half of the year, inflation will not stabilize quickly. The same goes for the exchange rate. The persistence of the Triple Highs — high inflation, a high exchange rate and high interest rates — will become a drag on growth. It goes without saying that a Blue House official's remark calling this a "cost of success" reflects a misguided view that hurts companies and ordinary people alike.
The policies the government must pursue consistently are too many to count on ten fingers, and they are both goals and tools. They include escaping low growth, achieving balanced growth, easing polarization, deregulation, addressing the low birthrate and nurturing talent. The list goes on.
Whatever the policy, consistency is what matters most. Once the direction is set and detailed goals are established, the government must keep pushing while checking progress toward those goals. At the very least, the economic team must take responsibility and carry out the plan through the end of its term. To do that, the budget must be spent where it is needed most, and cooperation among the public and private sectors, as well as between industry and academia, must be strengthened.