South Korea Introduces Historic Budget to Boost AI and Economic Growth
- President Lee Jae Myung announced a record budget of 820.9 trillion won ($610.14 billion) for 2027, focusing on AI and semiconductor investments.
- The budget includes a planned 4.7 trillion won allocation to develop a sovereign AI model and training for 2,000 semiconductor specialists.
- South Korea’s economy is projected to grow 3.3% in 2026, buoyed by a strong performance in semiconductor exports.
South Korean President Lee Jae Myung unveiled the nation’s largest budget to date on Monday, emphasizing the need for significant investments in artificial intelligence (AI) and future growth sectors. During a speech to the National Assembly, Lee detailed that the total spending for 2027 would increase by 12.8% to 820.9 trillion won ($610.14 billion), which includes a notable allocation of 21.3 trillion won for semiconductors, physical AI, and AI data centers—nearly double the funding for 2026.
In addition, a dedicated 4.7 trillion won will be channeled into developing a sovereign AI model, described by Lee as having the “world’s highest performance.” The South Korean government also aims to invest in human capital, with plans to train 2,000 specialists to spearhead semiconductor design and boost the regional semiconductor industry. Furthermore, the government is expanding AI education for students, job seekers, and existing workers.
To support this educational initiative, South Korea has established university “contract departments,” allowing students to enroll in company-linked degrees that lead to job opportunities at firms like Samsung Electronics and SK Hynix. These companies collaborate on course design, provide financial aid, and aid in recruiting graduates.
President Lee’s budget rollout aligns with the International Monetary Fund’s forecast that South Korea’s economy will grow by 3.3% in 2026, marking the fastest growth rate since the post-pandemic rebound in 2021. Lee assured that the increased spending would result in “virtually no net increase in government debt,” highlighting that newly issued bonds will be utilized to repay existing debts.
The budget will also enhance spending on defense and social security, with defense expenditures set to rise by 8.2% to 73.3 trillion won. “We will rapidly transform into a smart, elite, and powerful military by establishing a hybrid manned and unmanned system based on AI, robots, and drones,” Lee stated.
South Korea’s robust economic performance has been largely fueled by semiconductor exports, which have surged due to rising global demand for computing power amidst the AI boom. According to data released by the Korea Customs Service, exports soared by 93.7% year-on-year to a record $115.3 billion in October. Total shipments in the first ten months of 2026 reached $930 billion, surpassing the $900 billion milestone for the first time. The country also recorded a $42.5 billion trade surplus in October, with imports increasing by 36% year-over-year to $72.8 billion. Lee emphasized that South Korea is on the brink of achieving $1 trillion in annual exports, underscoring the strong showing of key industries, particularly semiconductors.
News Courtesy of CNBC
