2027 fiscal policy to potentially reach 800 tln won with goal of AI transformation

▲ The Ministry of Planning and Budget (Yonhap)

▲ This illustration depicts the concept of artificial intelligence (AI). (Yonhap)

S Korea-2027 budget

2027 fiscal policy to potentially reach 800 tln won with goal of AI transformation

By Kim Han-joo

SEOUL, March 30 (Yonhap) -- South Korea will pursue an expansionary fiscal policy next year to accelerate a major transition centered on artificial intelligence (AI), the government said Monday, with spending potentially approaching 800 trillion won (US$529 billion).

Under a set of guidelines approved by the Cabinet on the day, the government also aims to foster new growth engines and place greater fiscal emphasis on regional development, the Ministry of Planning and Budget said.

According to the government's fiscal management plan for 2025-2029, spending for next year is set at 764.4 trillion won, up 5 percent from the budget of 728 trillion won in 2026.

The figure does not reflect a supplementary budget of about 25 trillion won currently under preparation.

If expansionary fiscal policies continue alongside improved tax revenues, next year's budget could potentially rise to around 800 trillion won.

"At this point, what we can say is that we will pursue active fiscal management, as well as sustainable expansionary fiscal policy, yet it is difficult to predict the exact size of next year's fiscal spending," Cho Yong-beom, a senior ministry official, told reporters.

Cho said the budget guidelines reflect a trend of economic recovery, driven by improving domestic demand and continued export growth on growing chip demand.

However, he noted persistent structural uncertainties remain, such as tariff policies by major economies, geopolitical tensions in the Middle East, and a declining population, which call for proactive policy responses.

Under the guidelines, the government aims to build a highly innovative economy capable of adapting to industrial shifts such as AI transformation, while fostering advanced industries as new growth drivers.

To position South Korea as one of the world's top three AI powers, the government will promote AI adoption across all stages of the economy.

It also plans to expand a national growth fund and establish a special semiconductor account to ensure stable investment conditions in key sectors.

The government will also focus on balanced regional development, moving away from Seoul metropolitan area-centered growth under the vision to foster five major regional hubs along with three special self-governing provinces.

Key national universities in such regions will be developed into hubs for education and research, helping cultivate talent needed by local industries and boost regional economies.

The guidelines also emphasize stronger support for vulnerable sectors to address widening inequality.

On the industrial side, the government plans to foster a startup-friendly ecosystem for entrepreneurs and small business owners.

It will provide funding to selected prospective entrepreneurs and help small and medium-sized enterprises adopt AI and expand into new export markets.

For young people struggling to enter the job market, including those classified as economically inactive, the government will enhance customized education and training programs to facilitate workforce entry.

To achieve these goals, the government plans sweeping spending restructuring, the ministry said.

It aims to cut mandatory spending by around 10 percent, with discretionary spending to be reduced by about 15 percent.

The government signaled that next year's restructuring will be intensive, with the scale expected to exceed this year's record of 27 trillion won.

(END)

(C) Yonhap News Agency. All Rights Reserved