“Consumer sentiment is improving, and economic growth in the third quarter has rebounded to a six-quarter high of 1.2% from a contraction in the first quarter,” Lee said in his annual budget speech at the National Assembly.

“We are now out of crisis status, having taken steps with some extraordinary determination the past five months to cope with a severe economic crisis caused by the illegal martial law.”

Asia’s fourth-biggest economy expanded by 1.2% in the third quarter, as exports have generally held up despite uncertainties related to US tariffs.

Domestic demand has also been improving, underpinned by the Lee government’s extra budget of more than US$20 billion, which included two rounds of cash handouts that boosted spending at restaurants and in the retail sector

For 2026, Lee proposed an 8.1% increase in spending from this year’s government budget to 728 trillion won (US$512.14 billion), more than triple the 2.5% expansion of the 2025 budget.

He said the government planned to channel support into artificial intelligence, Korean cultural and entertainment content, shipbuilding and semiconductors to spur an “economic transformation.”