The economic team of President Lee Jae-myung marks its first anniversary, with evaluations indicating a sharp rebound in growth and export figures, largely driven by strong semiconductor exports. However, persistent high inflation, currency fluctuations, and employment challenges remain significant hurdles in translating these improvements into tangible economic recovery for the public.
According to relevant ministries, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol and Minister of Trade, Industry and Energy Kim Jeong-kwan held their inauguration ceremonies on July 21 last year, officially commencing their duties. Minister of Climate, Energy and Environment Kim Sung-hwan followed suit on July 22, and Minister of Employment and Labor Kim Young-hoon took office on July 24.
The first economic team faced numerous challenges amid domestic and international uncertainties, particularly due to prolonged domestic sluggishness and increasing tariff uncertainties from the United States. Concerns grew that the annual growth rate could remain around 0% after experiencing negative growth in the first quarter of last year.
However, the government focused on economic recovery through supplementary budgets, increased investment in advanced industries, and export support. The surge in exports, particularly in semiconductors, fueled by expanded artificial intelligence (AI) investments, led to a notable improvement in the economic performance indicators.
South Korea's real GDP growth rate was 1.0% last year, but it rebounded with a 1.8% growth in the first quarter of this year compared to the previous quarter, largely due to increased exports in information technology (IT) products, including semiconductors. Reflecting this trend, the government recently revised its growth forecast for this year from 2.0% to 3.0%, an increase of one percentage point.
Exports have been the key driver of economic recovery. According to the Korea Customs Service, last year's exports reached $709.47 billion, surpassing the $700 billion mark for the first time. In the first half of this year, exports also recorded a 48.3% increase year-on-year, totaling $496.35 billion, with semiconductor exports alone surging over 160% in the same period.
However, the growth led by semiconductors has sparked debate, as the semiconductor sector accounted for nearly 40% of total exports in the first half of this year, indicating a concentration of growth in specific sectors. This has resulted in a lack of sufficient spillover effects on employment and overall domestic demand.
Last month, the number of employed individuals increased by only 63,000 compared to a year earlier. Employment in the manufacturing sector decreased by 97,000, marking a 24-month consecutive decline, while the youth employment rate has shrunk for 26 months. In contrast, employment for those aged 60 and over increased by 211,000, raising concerns about the quality of jobs.
Inflation and currency pressures remain significant. The consumer price index in June rose by 3.2% compared to a year earlier, marking the second consecutive month above 3%. The living cost index, which closely reflects consumer sentiment, increased by 3.4%, outpacing the overall inflation rate. Although the won-dollar exchange rate has stabilized slightly, it continues to hover around 1,470 to 1,480 won, exacerbating import prices and cost burdens for businesses.
As the economic team enters its second year, its primary challenge will be to broaden the semiconductor-driven 'K-shaped recovery' to encompass domestic demand, regional development, small and medium-sized enterprises, and job creation. While the first year laid the groundwork for economic recovery, the focus now shifts to fostering growth across the economy through domestic demand and employment recovery, as well as investment outside the capital region.
The government is expected to intensify its efforts on three major projects: semiconductors, physical AI, and AI data centers. Achieving this will require attracting significant private investment and ensuring the provision of essential infrastructure, including power supply, water resources, and suitable locations. Additionally, the government must manage external pressures such as U.S. tariff policies, high oil prices from the Middle East, currency fluctuations, real estate instability, and fiscal burdens.
President Lee Jae-myung emphasized during a Cabinet meeting at the Blue House that now is the time to accelerate government initiatives as the administration enters its second year. He stated, "The first year was a preparatory phase, and now we must move forward with greater urgency in governance."
* This article has been translated by AI.
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