Lee Jae-myung administration's budget next year hits record 821 trillion won, all-in on 'three mega-projects, youth, and new growth' [2027 budget proposal]

[Financial News]  The Lee Jae-myung administration, now in its third year, has drawn up a record 821 trillion won budget for next year. It will also establish a Future Response Fund worth 162 trillion won. Riding the semiconductor boom, the government is pursuing an aggressive fiscal expansion. Next year, it will support infrastructure investment in power and water for the implementation of the mega semiconductor project, while focusing its resources on youth and balanced regional development.
On the 1st, the Ministry of Planning and Budget announced the 2027 budget proposal at a State Council of South Korea meeting chaired by President Lee Jae-myung.
At the meeting, Minister Park Hong-keun said, "Next year's budget is a plan in which the government will fully oversee the entire budgeting process and begin to deliver results in earnest." He added, "We will achieve two goals at once: driving economic growth and improving fiscal soundness."
The government defined next year's budget principles as "bold investment" and a "major shift in the fiscal management paradigm." Its goal is to achieve economic growth and fiscal soundness at the same time.
Total spending next year will rise 12.8%, or 93 trillion won, from this year to 820.9 trillion won, the largest on record. The increase is the highest since 2009, when it stood at 10.6%, and is five times larger than this year's 2.5% rise.
Backed by the semiconductor boom, total revenue will increase 30.4%, or 205.6 trillion won, from this year to 880.8 trillion won. Of that, national tax revenue, including corporate and income taxes, will rise by 194.2 trillion won from this year to 580.4 trillion won.
As tax revenue surges, the managed fiscal balance as a share of gross domestic product will improve by 3.8 percentage points from the previous year to around minus 0.1%. National debt next year will stand at 1,519.8 trillion won, and the debt-to-GDP ratio will fall to 48.3%, down from 51.6% in this year's main budget.
The Future Response Fund, created from additional tax revenue and cuts in mandatory spending, will launch with a total of 162.3 trillion won. Of that, 45.4 trillion won will be invested in four key areas: youth, growth engines, local regions, and education and talent. The remaining 116.9 trillion won will be held as reserve funds for use when needed.
Combined with total spending, the Future Response Fund brings fiscal capacity close to 1,000 trillion won.
The government will also carry out a strong 108 trillion won spending restructuring. It will abolish, after 55 years, the rule linking Local Education Subsidy Grants to domestic tax revenue, cutting mandatory spending by 32 trillion won. The government said it would "boldly invest" in five key areas, including semiconductors, growth engines, and balanced growth. It aims to make the preemptive investments needed to realize the Lee Jae-myung administration's "3-4-5 vision" of 3% potential growth, a top-four global export ranking, and $50,000 in per capita income.
To that end, it will allocate 21.3 trillion won to three mega-projects, including semiconductor production bases in the Capital Region and the Honam region, as well as Embodied AI. It will also create a special account worth 2.6 trillion won to strengthen semiconductor industry competitiveness and invest 2.1 trillion won in power, water, and industrial complex infrastructure.
The government will spend a total of 62.8 trillion won to expand future growth engines, including advanced industries beyond semiconductors, such as seven national strategic core technologies, including Small Modular Reactors (SMR), as well as the energy transition, startups, K-content, and support for small and medium-sized companies.
It has allocated a total of 43.3 trillion won for support at each stage of young people's lives, including jobs, education, assets, housing, marriage, and childbirth. Another 117.1 trillion won will be spent on regional growth, measures to address polarization, and expanded support and welfare for vulnerable groups.
[email protected] Jung Sang-kyun Reporter