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

South Korea has proposed a record 821 trillion won ($597 billion) budget for 2027, representing a historic 12.8% increase from 2026. Championed by President Lee Jae-myung, this expansionary fiscal shift is funded by a massive semiconductor tax windfall from chipmakers like Samsung Electronics and SK Hynix. The plan allocates 21.3 trillion won for chip infrastructure and establishes a Future Response Fund, while simultaneously reducing the national debt-to-GDP ratio and government bond issuance.

Record 2027 budget proposal

• ▪The South Korean government proposed 3.4 trillion won in spending for a nuclear-powered submarine program and other strategic weapons within its 2027 budget proposal
• ▪The South Korean government's proposed 2027 budget of 821 trillion won ($596.92 billion) requires approval from the country's parliament
• ▪South Korea proposed a record 2027 budget of 821 trillion won ($596.92 billion), representing a 12.8% increase from 2026, to strengthen the country's technological edge in artificial intelligence

Semiconductor tax revenue windfall

• ▪South Korea's total tax revenue is projected to rise 40.7% in 2027 to 584.4 trillion won, driven by semiconductor demand benefiting chipmakers Samsung Electronics and SK Hynix
• ▪The projected tax revenue windfall is expected to help reduce South Korea's debt-to-GDP ratio to 48.3% in 2027, down from an estimated 51.6% in 2026
• ▪South Korea's corporate tax receipts are projected to more than double to 216.7 trillion won in 2027 due to unprecedented profits in the semiconductor industry

Chip infrastructure investment

• ▪The South Korean government earmarked 2.6 trillion won for a special semiconductor budget in its 2027 fiscal proposal
• ▪The South Korean government allocated 21.3 trillion won in its 2027 budget for industrial water systems, power grids, and logistics networks to support next-generation semiconductor infrastructure

Future Response Fund strategy

• ▪South Korea's Future Response Fund will deploy 45.4 trillion won in 2027 to expand initiatives in youth welfare, future growth engines, and specialized education programs
• ▪South Korea plans to direct its projected 162.3 trillion won of excess tax revenue into a strategic endowment called the Future Response Fund for long-term investments

Lee Jae-myung fiscal expansion

• ▪South Korean Budget Minister Park Hong-keun stated on September 1, 2026, that the government plans to deploy fiscal resources expansively before gradually stabilizing spending growth to around 5% by 2030
• ▪South Korea's 2027 budget proposal signals a shift under President Lee Jae-myung toward expansionary fiscal policy, pivoting from three years of fiscal austerity under his predecessor
• ▪South Korean President Lee Jae-myung stated on September 1, 2026, that an interest rate rise is unavoidable for the economy, despite risks to growth potential and borrowing costs

Government bond issuance reduction

• ▪South Korea plans to reduce total government bond sales to 222.8 trillion won in 2027, down from 225.7 trillion won in 2026
• ▪South Korea's net government bond issuance is projected to decline by 13.1 trillion won to 96.3 trillion won in 2027, down from 109.4 trillion won in 2026

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