Seoul’s ‘do-or-die’ growth push turns to AI as Kospi eyes 5,000 - KED Global

South Korea will go all-out to rejuvenate the economy with a far-reaching push for technological innovation centered on artificial intelligence, a drive that could usher in the era of Kospi 5,000 faster than expected, the country’s finance chief reiterated on Monday.

“Without any clear external shocks, our growth rate dipped into the red in the second quarter of last year and the first quarter of this year, while potential growth has been on a downward slope,” Korea’s Finance Minister Koo Yun-cheol said at the Korea Investment Week 2025 (KIW 2025) forum in Seoul on Monday.

“This isn’t a time to ask ‘can we do it?’ It’s a make-or-break moment for ‘we must do it’.”

To make it happen, the administration of President Lee Jae Myung has pledged to drive AI-led innovation across industries from robotics and autos to shipbuilding, home appliances, semiconductors and pharmaceuticals, Koo said.

In late August, the finance ministry cut its 2025 growth forecast in half to 0.9%, the slowest pace since 2020, largely because of weaker exports under heavier US tariffs and sluggish private investment.

To revive momentum, it rolled out a package of projects aimed at positioning Korea, Asia’s fourth-largest economy, as a global leader in AI and advanced technologies, including a 19.3% jump in next year’s proposed R&D budget to 35.3 trillion won ($25.5 billion).

On Monday, the Kospi climbed to a fresh record of 3,407.31, marking a fourth straight session of gains after Koo, who also serves as deputy prime minister, earlier confirmed the government would maintain the 5 billion won threshold for capital gains taxes on large shareholders, rescinding an earlier plan to lower it to 1 billion won.

RELAXED REGULATIONS AND DIRECT INVESTMENT

Facing mounting pressure for sweeping economic change, Koo said the government will act more like a private sector player, pledging lighter regulations and direct investment.

“Like a company picking breakthrough technologies and going all-in, we’re choosing core innovation targets and putting the full weight of the state behind them – fiscal, tax, talent and regulatory support,” he said.

“In the past, industrial policy wasn’t backed by direct funding. Now, we’re putting money into projects immediately. Research that once received a few hundred million won is now getting billions,” he added.

The government has already scrapped preliminary reviews for major R&D projects, part of efforts to cut red tape and speed development, Koo said.

“Believe in the Korean economy – it will not let you down,” he reassured the audience in a keynote address at KIW 2025, an annual forum hosted by The Korea Economic Daily and Korea Investment & Securities Co.

The event drew more than 900 participants, including corporate chiefs, investors, analysts and policymakers.

Investors appeared to take heart.

On Tuesday, the Kospi extended its winning streak for the fifth session in a row, trading 1% higher in morning dealings.

Write to Han-Gyeol Seon and Woo-Sub Kim at always@hankyung.com
Sookyung Seo edited this article.