South Korea has announced its largest budget to date, with a focus on artificial intelligence and future growth sectors. On Monday, President Lee Jae Myung presented the 2027 budget to the National Assembly, revealing a 12.8% increase in total spending to 820.9 trillion won ($610.14 billion). A significant portion, 21.3 trillion won, is earmarked for semiconductors, physical AI, and AI data centers, nearly doubling the allocation from the previous year.
In a bid to develop a sovereign AI model with the 'world's highest performance, ' an additional 4.7 trillion won will be invested. The government is also prioritizing the cultivation of talent, aiming to train 2,000 specialists to lead in semiconductor design and the regional semiconductor industry. This initiative extends to enhancing AI education for students, job seekers, and current workers.
To support this educational push, South Korea has established university 'contract departments.' These departments offer company-linked degrees that pave the way for employment at major firms like Samsung Electronics and SK Hynix. Companies collaborate in designing courses, providing financial support, and recruiting graduates.
The budget increase aligns with the International Monetary Fund's forecast of a 3.3% growth in South Korea's economy by 2026, marking the fastest pace since the post-pandemic recovery in 2021. President Lee assured that the increased spending would not lead to a net rise in government debt, as new bonds will be issued to refinance existing debt.
Defense and Economic Growth
Defense spending is set to rise by 8.2% to 73.3 trillion won. Lee emphasized the transformation into a smart military, utilizing AI, robots, and drones to establish a hybrid manned and unmanned system.
South Korea's economic momentum is largely driven by its semiconductor exports, which have seen a dramatic increase. In October, exports surged 93.7% year-on-year to a record $115.3 billion, according to the Korea Customs Service. The first 10 months of 2026 saw shipments totaling $930 billion, surpassing the $900 billion mark for the first time.
The country recorded a $42.5 billion trade surplus in October, with imports rising 36% year-on-year to $72.8 billion. President Lee highlighted the potential for South Korea to achieve $1 trillion in annual exports, citing robust performance in key sectors, including semiconductors.
