South Korea proposes record $597 billion 2027 budget for AI investment
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South Korea unveiled a record 821 trillion won ($596.92 billion) budget proposal for 2027, a 12.8% increase from 2026. The plan aims to strengthen the country's technological edge in the global AI race, backed by surging semiconductor tax revenue. President Lee Jae-myung said an interest rate rise is unavoidable, even as the government expands spending.
Key Facts
- The 2027 budget proposal totals 821 trillion won ($596.92 billion), a 12.8% increase from 2026 and the largest year-on-year rise in South Korea's history.
- Total tax revenue is projected to rise 40.7% to 584.4 trillion won in 2027, with corporate tax receipts more than doubling to 216.7 trillion won.
- The government earmarked 2.6 trillion won for a special semiconductor budget and 3.4 trillion won for a nuclear-powered submarine programme and other strategic weapons.
- The debt-to-GDP ratio is expected to fall by 3.3 percentage points to 48.3% in 2027, down from 51.6% estimated for 2026.
- President Lee Jae-myung said on Tuesday that an interest rate rise is unavoidable, citing risks to growth potential and the impact of higher borrowing costs on the socially disadvantaged.
Budget Proposal
The budget ministry announced the spending plan at a cabinet meeting on Tuesday, where the national budget for 2027 is scheduled to be reviewed and adopted. Budget Minister Park Hong-keun said the government will deploy fiscal resources preemptively and expansively, backed by amplified tax revenues projected for 2026 and 2027. From 2028 onward, when the fiscal investments are expected to yield tangible economic returns, the government plans to gradually stabilise spending growth, tapering it to around 5% by 2030. The proposal requires parliamentary approval before it can take effect.
Revenue and Debt
The historic spending increase is supported by a windfall from the semiconductor industry, with Samsung Electronics and SK Hynix generating unprecedented profits from high-bandwidth memory demand in the AI boom. Total tax revenue is seen increasing 40.7% next year to 584.4 trillion won, with corporate tax receipts alone projected to more than double to 216.7 trillion won. That revenue will help reduce South Korea's debt-to-GDP ratio by 3.3 percentage points to 48.3%, down from 51.6% estimated for this year. Rather than channeling the projected 162.3 trillion won of excess tax revenue into short-term spending, the government plans to direct it into a strategic endowment called the Future Response Fund for long-term investments.
Economic Policy Shift
The proposal signals a shift in Asia's fourth-largest economy under President Lee Jae-myung, who has championed an expansionary fiscal policy since taking office in June last year. This marks a pivot away from three years of fiscal austerity under his predecessor. President Lee said on Tuesday the economy is at a point where an interest rate rise is unavoidable, risking denting growth potential at a time the socially disadvantaged are feeling the impact of higher borrowing costs.
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South Korea proposes record $597 billion 2027 budget for AI investment
