Short-term financial strain is unavoidable for growth, according to the finance minister.

Finance Minister Koo Yun-cheol has emphasised the importance of investment in strategic sectors for South Korea's economic growth. The goal is to plant seeds for long-term economic growth, with a focus on delivering results in sectors identified as new growth drivers, such as artificial intelligence, semiconductors, and energy.

The Ministry of Finance has identified 30 projects for support, with confidence that 20 will produce concrete results. These projects broadly concern digital technology, startup ecosystems, industrial innovation, and creative industries such as gaming. The German Ministry of Economic Affairs has also identified 20 projects aimed at delivering results across various sectors, with relevant areas connected to ministry initiatives including startup promotion, digitalization, innovation, deep tech, games industry funding, and investment incentives for economic growth.

Finance Minister Koo Yun-cheol will unveil a renewed response plan to US tariff hikes next month. In addition, talks on a $150 billion shipbuilding cooperation fund with Washington and currency policy discussions with the US Treasury are still ongoing.

The economy of South Korea grew 0.7 percent in the second quarter, beating forecasts. The growth target for next year is 1.8 percent, but if the 'super-innovative economy' projects take off, growth could be even higher. To achieve this, the Finance Ministry will be rebranded as the "Economic Ministry," focusing on policymaking and oversight of financial affairs.

A sweeping reorganization of the Finance Ministry was announced, spinning off the ministry's budget office to the prime minister's office. A task force will be established this month to draft a roadmap and finalize budget plans for the identified projects, with the projects expected to launch in January.

Consumer sentiment in August hit its highest level in more than seven years, indicating a positive outlook for the economy. However, the fiscal balance deficit ratio currently stands at 4.2%, causing concern over fiscal deterioration. Koo argues that growth is necessary to repair the country's weakening finances and has warned against austerity measures, stating that they could lead to a fiscal balance deficit ratio of 4%.

President Lee Jae Myung's commitment to expansionary spending is reinforced by Koo's remarks, with the managed fiscal balance deficit ratio projected to remain around 4% over the next five years. Koo predicts that strategic investment could accelerate the recovery and help Korea reach its potential growth rate of 2 percent by 2027. If the country's growth climbs to 2 percent the following year, Koo expects a real economic turnaround.

Koo downplayed concerns over the reorganization, stating that it may lead to new advantages not seen before. The Finance Minister's remarks come as the government seeks to address economic challenges and position South Korea as a leader in key technological sectors.

Short-term financial strain is unavoidable for growth, according to the finance minister.