Key Points

"My first directive as president would be to assess the economic situation. Revitalising the economy and restoring the people's livelihoods should take precedence over social reform or any other issues for now," Lee said at a press conference on Monday, the eve of the presidential election, in which he defeated his conservative rival Kim Moon-soo, reports Yonhap news agency.

The most pressing issue for Lee is trade negotiations with U.S. President Donald Trump, as Washington's sweeping tariff policies have dealt a blow to South Korea's trade-dependent economy.

The new government is supposed to conclude negotiations with the U.S. before July 9, when Trump's 90-day suspension of high global tariffs, including a 25 percent levy on South Korea, is set to expire. Seoul and Washington have agreed to work toward a comprehensive "package" agreement covering trade and related issues before the 90-day period runs out.

Lee has said that his priority is meeting with Trump, while emphasising the importance of engaging in "reasonable and rational conversations" to reach mutually beneficial solutions.

"The leadership vacuum over the past several months appears to have contributed to the U.S. imposing high tariffs on South Korean products," former Trade Minister Yeo Han-koo said. "Building consensus through summit-level diplomacy will be crucial to resolving the tariff issue."

Apart from the threatened reciprocal tariffs, a separate 10 percent baseline tariff and 25 percent duties on steel, aluminum and auto-related products remain in place, with South Korea bearing the brunt of the protectionist measures.

Exports fell 1.3 percent from a year earlier to US$57.3 billion in May, with shipments to the U.S. declining 8.1 percent and those to China dropping 8.4 percent amid uncertainties in the global trade environment.

During the first three months of this year, South Korea's real GDP contracted 0.2 percent from the previous quarter, which marked the first on-quarter contraction in nine months.

Last week, the Bank of Korea (BOK) sharply lowered its outlook for the country's economic growth this year to 0.8 percent from its previous projection of a 1.5 percent expansion.

If realised, it would be the slowest growth since the first year of the COVID-19 pandemic in 2020, when the economy contracted by 0.7 percent, and match the level recorded in 2009 following the global financial crisis.

"The inauguration of the new government is projected to help ease political instability that had dampened consumption and investment following the imposition of martial law (by former President Yoon Suk Yeol) in December. But the effects of U.S. tariffs are expected to become more pronounced in the second half of this year," a BOK official said.

In an effort to bolster the ailing economy and support small merchants and the people, the Lee government is expected to draw up a supplementary budget sooner or later.

Lee has vowed to introduce an additional budget of at least 30 trillion won (US$21.77 billion), which would come on top of the 13.8 trillion-won supplementary budget approved by the National Assembly last month.

"More fundamental solutions are also needed to better respond to changes in the global trade order and supply chains. We need to reduce our dependence on the U.S. and China, while strengthening trade relations with other partners," said professor Heo Jun-young of Seoul's Sogang University.

He has vowed to create a 100 trillion-won fund in partnership with the private sector to position the country among the world's top three AI powers.

- IANS