Super Budget Approaching 800 Trillion Won...Focused Investment in AI and Overcoming Polarization

The Lee Jaemyung administration, which advocates for expansionary fiscal policy, has issued its first set of budget guidelines for next year, emphasizing a sweeping transformation through artificial intelligence (AI) and the strengthening of growth engines. The budget for next year, which has now entered the 760 trillion won range, will be heavily allocated to fostering region-driven growth and addressing the structural causes of polarization. At the same time, the government has announced a plan for intense expenditure restructuring aimed at managing the swollen fiscal scale—not only by cutting discretionary spending, but also by reducing mandatory expenditures by 10%.

On March 30, the government announced at a Cabinet meeting that it had approved the 2027 budget formulation guidelines containing these measures. According to the National Fiscal Management Plan for 2025–2029, next year’s fiscal expenditure is projected to reach 764.4 trillion won, a 5.0% increase from this year’s budget of 728 trillion won. However, if the government’s ongoing supplementary budget of 25 trillion won is reflected, total fiscal expenditure is expected to approach 790 trillion won, nearing the 800 trillion won mark. Choyongbeom, Director General of Budget at the Ministry of Planning and Budget, stated, “At this point, our goal is to pursue proactive fiscal management, and furthermore, sustainable proactive fiscal management,” while declining to specify the exact total expenditure for next year.

Yonhap News Agency

The government has announced a high-intensity expenditure restructuring plan for next year’s budget, not only aiming to reduce discretionary spending by 15%, but also targeting a 10% reduction in mandatory expenditures such as welfare and personnel costs, which are determined by law. Ten percent of all government projects will be abolished. As a result, the scale of expenditure restructuring is expected to surpass this year’s record-high level of 27 trillion won. The Ministry of Planning and Budget explained, “For the first time, a reduction target has been set for mandatory expenditures, accompanied by legislative action plans, as part of an unprecedented expenditure restructuring initiative.”

Accordingly, the government has set four major fiscal investment priorities: transforming the national growth paradigm, promoting region-driven growth, addressing polarization, and establishing a foundation for safety and peace. The administration has pledged to expand growth engines through AI transformation (AX) and green transformation (GX). To achieve its goal of becoming one of the world’s top three AI powerhouses, the government will promote AX at each stage—manufacturing, pilot testing, and distribution—across various industries, while expanding the National Growth Fund and establishing a special semiconductor account to ensure stable investment conditions. It will also implement the K-GX strategy to build a carbon-neutral ecosystem, invest in strategic sectors, industries, and infrastructure (such as the creation of solar income villages), and provide concentrated support for the production and distribution of K-Content.

From next year, the government will fully implement a fiscal project preference principle, which provides more support to regions farther from Seoul and the capital area. In this year’s budget, the preference was piloted in seven areas, including child allowances. Starting next year, each ministry will be required to identify projects eligible for regional preference and submit them in their budget requests. To address K-shaped polarization, the government will expand the age range for child allowance payments, increase the supply of public rental housing to alleviate housing insecurity, and provide substantial support for vulnerable sectors.

Based on the finalized budget formulation guidelines, each ministry must submit its budget requests to the Ministry of Planning and Budget by May 31. After review and coordination with the fiscal authorities, the government’s budget proposal will be submitted to the National Assembly by September 2.

This content was produced with the assistance of AI translation services.