South Korea proposes record $597 billion 2027 budget to supercharge AI investment

South Korea unveiled an unprecedented fiscal spending plan for 2027, setting government expenditure at 821 trillion won ($596.92 billion), marking a 12.8% year-on-year increase. This historic budget rise is fueled by the booming semiconductor industry, particularly chipmakers Samsung Electronics and SK Hynix, whose profits have surged due to global demand for high-bandwidth memory essential for AI technologies.

The additional tax revenue of 40.7% to 584.4 trillion won is expected to lower South Korea's debt-to-GDP ratio by 3.3 percentage points to 48.3%. Budget Minister Park Hong-keun announced that the government will deploy fiscal resources preemptively and expansively. A special semiconductor budget of 2.6 trillion won and 3.4 trillion won for strategic weapons such as nuclear-powered submarines are part of the plan.

The surplus tax revenue will be channeled into a long-term investment fund, the Future Response Fund, which will allocate 45.4 trillion won for youth welfare, future growth engines, and specialized education programs. Additionally, the budget proposes allocating 21.3 trillion won to bolster national chip manufacturing infrastructure, including industrial water systems, power grids, and logistics networks.

Net government bond issuance will decline by 13.1 trillion won to 96.3 trillion won, due to increased tax revenues.