S. Korean Govt Proposes Expansionary Budget Plan for 2026

The new South Korean government, led by President Lee Jae-myung, who took office in early June, proposed an expansionary budget plan for 2026 on Friday, focusing on artificial intelligence (AI) and research and development (R&D).

Lee presided over a cabinet meeting to endorse his administration's first full-year budget of 728.0 trillion won (524.2 billion U.S. dollars) for next year, up 8.1 percent compared to the previous year.

If confirmed in the National Assembly later this year, the 2026 fiscal spending would grow far faster than an increase of 2.5 percent in 2025, 2.8 percent in 2024 and 5.1 percent in 2023.

The president has stressed the need for an expansionary fiscal expenditure to foster future growth engines, including AI, renewable energy, biomedicine, defense industry and advancing manufacturing, through expanded R&D.

Allocated for next year's R&D budget was 35.3 trillion won (25.4 billion dollars), up 19.3 percent from a year earlier. It marked the fastest expansion in the country's modern history.

For a so-called "super innovative economy," driven by cutting-edge technologies, 72 trillion won (51.9 billion dollars) was allotted for 2026, up 41 percent from a year earlier.

Among the total, 10.1 trillion won (7.3 billion dollars) was earmarked for physical AIs, such as AI robots, AI automobiles, AI ships, AI chips, AI factory and AI home appliances, while 44.3 trillion won (31.9 billion dollars) would be spent on the technology development in the future growth engines and the creation of relevant investment funds.

Lee has pledged to make South Korea become one of the world's top three AI powerhouses by adopting a strategy of first-mover, away from its previous fast-follower tactics.

Budget for energy, industry and mid-sized enterprises jumped 14.7 percent to 32.3 trillion won (23.3 billion dollars) for 2026 compared to the previous year to support the follow-up tasks of the South Korea-U.S. tariffs negotiations and the renewable energy transformation.

Next year's defense budget grew 8.2 percent to 66.3 trillion won (47.7 billion dollars), while the budget for health, social welfare and employment mounted 8.2 percent to 269.1 trillion won (193.8 billion dollars).

Budget for the environment and the culture, sports and tourism swelled 7.7 percent and 8.8 percent, each.

Aggregate revenue, including tax and non-tax revenue, was estimated at 674.2 trillion won (485.5 billion dollars) for 2026, up 3.5 percent from a year earlier.

The estimated ratio of the managed fiscal deficit, which excludes social security funds, to the gross domestic product (GDP) was set at 4.0 percent in 2026, up from 2.8 percent this year.

The ratio of the central government's debt to the GDP was forecast to advance from 48.1 percent this year to 51.6 percent next year.  

Xinhua/RSS