South Korean President Lee Jae Myung announced the nation's largest budget to date, projecting total spending for 2027 to reach 820.9 trillion won, representing a 12.8% increase. The budget allocates 21.3 trillion won for semiconductors, physical AI, and AI data centers, nearly doubling the 2026 level. Furthermore, a separate 4.7 trillion won is earmarked for developing a sovereign AI model, which Lee described as having the "world's highest performance."
The government plans significant investment in human capital, including training 2,000 specialists to "lead semiconductor design and the regional semiconductor industry," alongside expanding AI education for students, job seekers, and current workers. To facilitate job placement, South Korea is establishing university "contract departments," allowing students to pursue company-linked degrees with pathways to firms such as Samsung Electronics and SK Hynix before graduation. Lee stated that the increased spending would result in "virtually no net increase in government debt," citing the use of newly issued bonds to repay existing debt.
Defense expenditure is set to rise 8.2% to 73.3 trillion won, with Lee adding, "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." The announcement comes as the International Monetary Fund forecasts South Korea's economy will grow 3.3% in 2026, marking its fastest pace since the post-pandemic rebound in 2021. Separately, data from the Korea Customs Service showed that semiconductor exports surged 93.7% from the previous year to a record $115.3 billion in October, and total shipments reached $930 billion in the first 10 months of 2026.
