South Korea’s 2027 Budget Tops $530 Billion for First Time: $66 Billion ‘Future Response Fund’ Targets Three Major AI Super Projects

TradingKey - On July 13, Seoul time, the South Korean government officially announced its fiscal year 2027 budget plan, with total fiscal expenditure surpassing 800 trillion won (approximately $530 billion) for the first time. This represents a significant jump from this year's 727.9 trillion won, setting a record for the largest-ever spending scale in South Korean history. The confidence behind this "super budget" primarily stems from the better-than-expected tax windfall generated by the South Korean semiconductor industry amid the global AI wave.

Park Hong-keun, head of South Korea's Planning and Budget Office, announced at the National Fiscal Strategy Meeting that day that national tax revenue in 2027 is expected to exceed 500 trillion won (approximately $331.6 billion), a sharp jump from the previous forecast of 412.1 trillion won, which also sets a new historic record.

Park attributed this surge in fiscal revenue to the "semiconductor industry boom driven by the AI wave." He emphasized that this round of excess tax revenue triggered by artificial intelligence demand is a "once-in-a-generation major opportunity" and a valuable source of funding to solidify the foundation for South Korea's development over the next 20 to 30 years. The export explosion of high-end products such as High Bandwidth Memory (HBM) and DDR5 is the primary driver.

Regarding this "unplanned" windfall generated by the AI dividend, the South Korean government decided to establish a "Future Response Fund" to convert tax revenues exceeding long-term trend levels into long-term strategic investments, rather than directly distributing "national dividends." The fund's size could reach up to approximately 100 trillion won, with tax collection expected to be completed by early 2027.

Park stated that the funds will be primarily directed toward four key areas: the younger generation, growth drivers, balanced regional development, and talent cultivation. The new fund will also provide financial support for the core economic agenda of the Lee Jae-myung administration, including the three "super projects" announced earlier this month. Park emphasized that the fund will serve as a "strategic investment platform that transcends the limitations of single-year budgets" while acting as a fiscal stabilizer during economic downturns.

The government made it clear that semiconductors, AI data centers, and physical artificial intelligence are designated as the three "super projects" and will receive priority fiscal funding. President Lee Jae-myung previously characterized these three projects as "new growth engines that will determine South Korea's trajectory over the next 20 to 30 years."

Meanwhile, the government plans to push forward with spending restructuring of approximately 50 trillion won, which is twice the size of the previous year. To ensure the availability of investment funds, the Planning and Budget Office will break with convention and conduct a comprehensive and thorough zero-based review of all discretionary spending as well as statutory mandatory expenditures such as basic pensions and educational fiscal allocations, resolutely restructuring underperforming projects.