South Korea announces the largest budget in history: AI and semiconductor spending nearly doubled, pointing to “the world's highest performing” sovereign AI

The Zhitong Finance App learned that South Korean President Lee Jae-myung announced the largest budget in the country's history on Monday, promising to “invest heavily in artificial intelligence (AI) and future growth engine industries.”

Speaking at the National Assembly on Monday, Lee Jae-myung said that total spending in 2027 will increase by 12.8% to 820.9 trillion won (about US$610.14 billion), including 21.3 trillion won for semiconductors, physical AI, and AI data centers — nearly double the 2026 level.

An additional 4.7 trillion won will be used to develop a sovereign AI model, which Lee Jae-myung says will have “the highest performance in the world.”

Korea also plans to invest heavily in talent development, including training 2,000 experts to “lead semiconductor design and the regional semiconductor industry,” while expanding AI education for students, job seekers, and working workers.

Korea has established a “contract department” at a university. Students can study for a degree linked to a company and get access to work for companies such as Samsung Electronics and SK Hynix before graduation. Cooperating companies participate in design courses, provide financial support, and recruit eligible graduates.

At the time of the introduction of this record spending plan, the International Monetary Fund (IMF) predicts that the South Korean economy will grow by 3.3% in 2026, the fastest growth rate since the post-pandemic rebound in 2021.

Lee Jae-ming said that this round of fiscal expansion will hardly result in an increase in the government's net debt, and the additional debt issuance funds will be used to replace existing debt.

The budget also increased spending on defense and social security for young people. Defense spending will increase by 8.2% to 73.3 trillion won.

Lee Jae-myung said, “We will rapidly transform into an intelligent, elite, and powerful military by establishing a mixed manned and unmanned system based on AI, robots, and drones.”

According to information, the AI wave is driving up global demand for computing power, and semiconductor exports have become the core driving force for South Korea's rapid economic growth. According to data released by the Korea Customs Service on Sunday, exports in October increased 93.7% year over year, reaching a record 115.3 billion US dollars.

Total exports in the first 10 months of 2026 reached 930 billion US dollars, breaking the 900 billion US dollar mark for the first time. South Korea achieved a trade surplus of 42.5 billion US dollars in October, and imports increased 36% year over year to 72.8 billion US dollars.

Lee Jae-myung said that with the strong performance of key industries such as semiconductors, South Korea's annual exports are expected to reach 1 trillion US dollars. This will make South Korea the fourth country in the world to reach this milestone after the US, China, and Germany.

However, at the same time, he warned that the distribution of growth dividends is uneven. “In the past, opportunities and benefits were concentrated in specific regions, classes, and a small number of enterprises, which was the growth of a small number of people. We must complete a major transformation towards growth shared by all.”

Lee Jae-ming mentioned that the country's fiscal fundamentals continue to improve: next year, the fiscal deficit rate will narrow from 3.9% this year to 0.1% of GDP, the lowest level in 20 years; the government debt ratio will drop from 51.6% to 48.3%.