South Korea Plans 206% AI Funding Boost, 8.1% Budget Rise 2026

South Korea, under President Lee Jae Myung's administration, plans a significant increase in its 2026 budget to spur economic growth, with a strong emphasis on artificial intelligence (AI) and technological innovation. The total government spending is set to rise by 8.1% to KRW 728 trillion, marking the steepest increase in four years, with AI-related projects receiving a 206% boost in funding. This expansionary fiscal policy aims to overcome challenges from U.S. tariffs and demographic shifts by prioritizing investment in AI sectors such as manufacturing robots, automobiles, ships, and semiconductors. Additionally, the government has amended the Korea Development Bank Act to raise the capital ceiling by 50%, enabling greater financial support through low-interest loans for AI and other strategic industries. Despite this increased expenditure, South Korea's fiscal deficit is projected to widen to 4.0% of GDP in 2026, with the debt-to-GDP ratio expected to rise to 51.6%. The government plans to moderate spending growth after 2026 to maintain fiscal sustainability while maintaining its commitment to AI-led innovation and energy transition efforts.