South Korea Proposes Record Budget With Major AI, Chip and Defense Spending

South Korean President Lee Jae-myung presented the country's largest-ever budget plan on Monday, calling for significantly expanded investment in artificial intelligence and other growth sectors.

Addressing the National Assembly, Lee outlined total spending of 820.9 trillion won (about $610.14 billion) for 2027, a 12.8% increase. Within that figure, 21.3 trillion won is earmarked for semiconductors, physical AI and AI data centers - nearly double the 2026 allocation.

A further 4.7 trillion won would support development of a sovereign AI model that Lee described as aiming for the "world's highest performance." The plan also includes training 2,000 specialists for semiconductor design and the regional chip industry, alongside expanded AI education for students, job seekers and current workers.

The budget proposal also sets defense spending at 73.3 trillion won, up 8.2%, with Lee saying the military would move toward a hybrid manned and unmanned system built on AI, robots and drones.

Lee said the increased spending would produce "virtually no net increase in government debt," with newly issued bonds directed at repaying existing obligations. The proposal follows IMF forecasts of 3.3% growth for South Korea's economy in 2026, which would be its fastest pace since the post-pandemic rebound in 2021.

Source: CNBC