South Korea has unveiled a record-breaking budget for 2027, setting total government spending at 821 trillion won (approximately HK$4.7 trillion), marking a 12.8 percent increase from the current year. This rise represents the largest year-on-year boost in the country’s history and signals a shift toward expansionary fiscal policies under President Lee Jae Myung, who took office last June.

The proposed budget aims to reinforce South Korea’s technological capabilities amid intensifying global competition in artificial intelligence and other advanced industries. Central to this financial surge is the country’s booming semiconductor sector. Leading chip manufacturers Samsung Electronics and SK Hynix are generating substantial profits driven by strong demand for high-bandwidth memory essential to AI applications.

The government projects a 40.7 percent increase in total tax revenue for 2027, reaching 58.4 trillion won, with corporate tax receipts expected to more than double to 216.7 trillion won. This enhanced revenue outlook is instrumental in improving South Korea’s fiscal health, as officials forecast the debt-to-gross-domestic-product (GDP) ratio will decrease by 3.3 percentage points, from an estimated 51.6 percent this year to 48.3 percent next year.

Budget Minister Park Hong-keun emphasized the government’s strategy to use fiscal resources proactively and expansively in the short term. “From 2028 onwards, a period when these fiscal investments are expected to yield tangible economic returns, we will gradually stabilise the spending growth rate, tapering it down in stages to around the 5 percent level by 2030," Park said.

The budget includes notable allocations such as 26.6 trillion won designated for a special semiconductor fund to bolster research and development. Additionally, the government has earmarked 3.4 trillion won for the development of a nuclear-powered submarine program and other strategic military capabilities.

This comprehensive spending plan requires approval from South Korea’s National Assembly. President Lee acknowledged that while the economy may face pressure from rising interest rates, which could dampen growth and strain vulnerable populations through higher borrowing costs, the budget is designed to lay a solid foundation for South Korea to assert itself as a global leader in cutting-edge technology.

Lee highlighted the country’s pivotal moment between sustained low growth and a potential rebound, stating the need for a growth-oriented strategy. “We need a productive strategy that uses expanded resources for future growth to enlarge the economic pie, strengthen industrial competitiveness and, in turn, create greater fiscal room,” he said, underscoring the government’s commitment to leveraging this budget for long-term economic resilience.