Government Sets 2% Real GDP Target for 2026 The administration announced a 2 percent real‑GDP goal for 2026, branding the year as the start of a “great economic leap” after a weak 2025 performance[1][2][3]. Officials stress the target is directional, aiming to revive potential growth rather than guarantee a precise figure[1]. The plan is presented as a test of reform and execution, with the government positioning itself as a global leader in strategic sectors[1][3].

Policy Package Emphasizes Semiconductors, AI, Defense, and Biotech Central to the agenda is a push to make Korea the world’s No. 2 semiconductor power and to rank among the top three in AI and top four in defense exports[3][1]. A presidential‑office committee will coordinate chip‑sector competitiveness, while broader reforms target AI infrastructure, biotech, petrochemicals, and steel[3]. These initiatives are framed as pillars of a “super‑innovation economy” intended to diversify growth beyond traditional export reliance[1].

Fiscal Expansion Includes 8% Budget Rise and Consumption Boosts The 2026 budget totals 727.9 trillion won, reflecting an 8.1 percent year‑on‑year increase that funds public‑fund incentives, cash handouts, and supplementary budgets from 2025[3]. Private consumption is projected to grow 1.7 percent, aided by policy measures, while construction investment should rise 2.4 percent and employment expand by roughly 160 000 jobs[3]. Officials argue that these fiscal tools will mobilize private capital and support the targeted industrial sectors[1].

Growth Outlook Highlights Export‑Driven Gains and Structural Risks Recovery is expected to be uneven, with export‑intensive industries like semiconductors leading while services, construction, and small businesses lag, creating a K‑shaped split[1]. Dependence on the semiconductor cycle leaves the economy vulnerable to AI slowdown, Chinese competition, and higher U.S. tariffs[1]. Demographic headwinds, labor‑market rigidity, and regulatory uncertainty could blunt productivity gains unless substantive reforms accompany fiscal spending[1]. External forecasters, including the Bank of Korea, project growth near 1.8 percent, warning that without structural change the rebound may prove cyclical[1].