Assessing economic impact after US midterm elections

Seven SEED sectors targeted to diversify growth engines

Surplus tax revenue to bolster support for vulnerable borrowers

Minister of Planning and Budget Park Hong-keun said Wednesday that "the recent stock market correction must be recognized as a serious signal about our economy's overreliance on semiconductors."

Park made the remarks at an expert luncheon held at the National Assembly members' office building to discuss economic trends following the US midterm elections and the government's fiscal response.

Minister of Planning and Budget Park Hong-keun speaks at an expert forum on economic trends following the US midterm elections, held Wednesday afternoon at Meeting Room 11 of the National Assembly members' office building in Seoul. [Ministry of Planning and Budget]
Minister of Planning and Budget Park Hong-keun speaks at an expert forum on economic trends following the US midterm elections, held Wednesday afternoon at Meeting Room 11 of the National Assembly members' office building in Seoul. [Ministry of Planning and Budget]

Attendees included Kwon Nam-hoon, president of the Korea Institute for Industrial Economics and Trade; Joo Won, head of the research division at the Hyundai Research Institute; Park Eun-gyun, director of the regional trade research division at KOTRA; Park Jong-hoon, chief economist at SC; and Choi Kyung-jin, president of the Korean Association of Artificial Intelligence Law.

Park said significant shifts in the US policy landscape are expected following the midterm election results, and that widening volatility in domestic and international financial markets raises concerns about the ripple effects on South Korea's semiconductor-heavy economy. Park added, however, that the economy's fundamentals remain solid, pointing to a growth rate forecast in the mid-3 percent range this year and the prospect of per capita national income crossing the $40,000 threshold.

The forum also examined how US discussions on AI data center regulation could affect South Korea's semiconductor industry and fiscal conditions.

Participants said AI investment is unlikely to contract amid intensifying global competition for technological supremacy, and that domestic companies' earnings base remains strong, supported by the expansion of long-term supply agreements. They also agreed on the need to diversify the country's industrial structure away from its heavy dependence on semiconductors.

"Given how large a share semiconductors occupy in our economy and public finances, we are monitoring related developments closely," Park said, adding that a future revenue fluctuation fund could serve as a buffer against tax revenue swings.

Park said the government intends to use the recent market correction as an opportunity to reduce the risks of semiconductor concentration, pursuing industrial diversification through fiscal investment in next-generation growth engines. Specifically, the ministry plans to invest in seven SEED sectors: small modular reactors, nuclear fusion, renewable energy, quantum technology, space and aviation, advanced biotech, and advanced supply chain ecosystems.

Park also said fiscal policy must play a role in stabilizing livelihoods, noting that the cost of living and inflation emerged as central issues in the US midterm elections. "If people cannot feel the fruits of growth, the momentum for growth itself may weaken," Park said.

Park went on to say the government would "ensure fiscal policy plays an active role in preventing the shocks of high inflation and high interest rates from cascading onto vulnerable groups," pledging to press ahead without delay with reinforced support for vulnerable borrowers using surplus tax revenue, as well as three key livelihood projects covering employment, residential welfare and financial services for low-income households.

Participants at the forum also agreed that the gains from export growth must be more broadly shared so that strong export performance translates into stronger domestic demand and employment, the ministry said.

"I will actively incorporate the diverse expert opinions raised at today's forum into the National Assembly's deliberations on the 2027 budget, the operation of the future response fund, and the development of medium- and long-term strategies," Park said. "Given how significantly changes in external conditions affect our economy and people's livelihoods, I will continue to communicate closely with experts going forward."


y2k@heraldcorp.com