South Korea Proposes $599bn Budget
The record budget for 2027 represents a 12.8% increase from 2026, with a focus on boosting spending on chips and defence, backed by a windfall from the country's semiconductor industry
South Korea has proposed a record $599 billion budget for 2027, representing a 12.8% increase from 2026, to boost spending on chips and defence. The budget aims to strengthen the country's technological edge and reduce its debt-to-GDP ratio.
The total government expenditure for 2027 is set at 821 trillion won, with total tax revenue expected to increase by 40.7% next year to 584.4 trillion won. Corporate tax receipts are projected to more than double to 216.7 trillion won, driven by the country's booming semiconductor industry.
The government has earmarked 2.6 trillion won for a special semiconductor budget, and 3.4 trillion won in spending for a nuclear-powered submarine programme and other strategic weapons. This increased spending is possible due to the windfall from the country's semiconductor industry, with chipmakers such as Samsung Electronics and SK Hynix generating unprecedented profits.
The budget proposal will require parliamentary approval. If approved, it is expected to help reduce South Korea's debt-to-GDP ratio by 3.3 percentage points to 48.3%, down from 51.6% estimated for this year.
## Why it matters The proposed budget is a significant shift in Asia's fourth-largest economy, marking the largest year-on-year increase in the country's history. The increased spending on chips and defence is aimed at strengthening the country's technological edge amid the global AI race. The budget is also expected to have a positive impact on the country's economy, with the government planning to deploy fiscal resources preemptively and expansively to yield tangible economic returns.
## What happens next The budget proposal will now be sent to parliament for approval. If approved, the government plans to gradually stabilise the spending growth rate, tapering it down in stages to around the 5% level by 2030. This will help ensure that the country's debt-to-GDP ratio continues to decrease, and that the economy remains stable in the long term.
The proposed budget is a significant development for South Korea, and its impact will be closely watched by economists and industry experts. With the country's semiconductor industry continuing to boom, it is likely that the budget will have a positive impact on the economy, and help strengthen the country's position in the global tech industry.
