South Korea's ruling Democratic Party (DP) and the government on Tuesday, 25 August jointly underscored the need for an active fiscal policy stance and strategic investment in future industries, as President Lee Jae Myung eyes a record-high national budget of approximately ₩800 trillion (US$540 billion) for 2027. The proposal marks the most ambitious spending plan in the country's history, anchored by a newly created 'future response fund' designed to channel semiconductor boom revenues into long-term structural investments.

Key Priorities in the 2027 Budget Proposal

DP floor leader Han Byung-do, speaking at a consultative meeting between party and government officials, called on the administration to concentrate fiscal capacity on securing leadership in future industries. 'Above all, we should focus our fiscal capacity on securing leadership in future industries,' Han said, urging strategic allocation toward youth support, region-led growth, and emerging sectors.

DP chief policymaker Rep. Kwon Chil-seung echoed that push, specifically calling for strategic investments in artificial intelligence (AI) to position South Korea among the world's top three AI powers. 'The 2027 budget proposal should play an active fiscal role, not only in supporting the country's growth but also its transformation,' Kwon said, flagging bio, culture, defence, and energy as additional priority sectors.

The 'Future Response Fund' Explained

Budget Minister Park Hong-geun outlined the government's fiscal strategy, stating that increased tax revenues from the ongoing semiconductor boom will be directed into the 'future response fund' — earmarked for strategic, long-term investment rather than short-term expenditure. Park described the overarching goal as building an 'irreplaceable South Korea' through active fiscal management.

The five key investment areas identified by the DP and the government include advancing the AI sector and the 'three megaprojects' initiative — a large-scale programme unveiled in late June calling for concentrated investment in semiconductors, physical AI, and AI data centres in regional areas.

Aerospace, EVs, and Regional Development

The budget proposal also includes a significant scale-up in aerospace research and development, with the government targeting a lunar landing by 2030. Plans include securing 10,000 graphics processing units (GPUs) to develop frontier-level AI models.

Other headline commitments include record-high subsidies for electric vehicles (EVs), support for developing nuclear-powered submarines, and full tuition support for students at regional national universities. The ruling party also pledged to boost future growth engines such as aerospace, address economic polarisation, and improve public safety.

What This Means for South Korea's Economy

This comes amid a broader global race for AI and semiconductor supremacy, with South Korea seeking to leverage its existing chip-manufacturing strength — anchored by players like Samsung and SK Hynix — into a wider industrial transformation. Notably, the budget's reliance on semiconductor tax revenues introduces a cyclical risk: a downturn in chip demand could compress the fund's firepower.

The formal budget proposal is expected to be submitted to the National Assembly for approval in the coming months, where its record scale and sectoral allocations will face parliamentary scrutiny.