Korea to more than triple AI budget to $7.27 bil. in 2026

President Lee Jae Myung presides over a Cabinet meeting as Prime Minister Kim Min-seok, left, and Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol listen at the presidenital office in Seoul's Yongsan District, Friday. Yonhap

The government has proposed to spend 10.1 trillion won ($7.27 billion) on artificial intelligence (AI) initiatives in 2026 — more than triple the 3.3 trillion won allocated for 2025, according to officials, Friday.

The planned spending is in line with President Lee Jae Myung’s vision to position Korea as one of the world’s top three AI powerhouses, alongside the United States and China.

The 10.1 trillion won is part of the record-high 728 trillion won budget for 2026, which marks an 8.1 percent increase from 2025 and is projected to raise the national debt-to-GDP ratio to 51.6 percent.

Although exceeding the 50 percent threshold is often viewed as a warning sign for fiscal health, the government sees aggressive spending as unavoidable to revitalize the sagging economy.

“Our economy faces two simultaneous challenges: innovating the commercial sector with new industries and overcoming an export-dependent economy vulnerable to external shocks,” Lee said as he presided over a Cabinet meeting, Friday.

The president added, “The budget proposal discussed at today’s Cabinet meeting is the catalyst to address these challenges and to drive recovery and growth through grand economic innovation.”

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol described Korea as having “a final golden opportunity to leap forward as a global leading nation in the era of AI-led transformation.”

He noted that 2026 will mark the Lee administration’s first regular budget, and that sustaining an expansionary fiscal policy — following the 31.8 trillion won supplementary budget set shortly after Lee took office on June 4 — will be essential to reversing the economic slowdown.

“In that regard, we plan to use fiscal policy more proactively to drive a major transformation,” Koo said while briefing on the 2026 budget.

The 728 trillion won budget proposal was endorsed by the Cabinet and will be submitted to the National Assembly on Wednesday for approval.

The president urged “close communication between the government and the National Assembly to ensure smooth budget approval.”

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol, right, talks with Minister of Trade, Industry and Energy Kim Jung-kwan prior to a Cabinet meeting at the presidenital office in Seoul's Yongsan District, Friday. Yonhap

Record increase in R&D spending

According to the Ministry of Economy and Finance, the transition toward becoming a global AI power is one of five technology-oriented initiatives aimed at revitalizing Korea’s lackluster economy into a “hyper-innovative” one.

The four other initiatives focus on fostering new growth engines and related research and development, addressing trade issues and supporting exports, accelerating the energy transition and achieving carbon neutrality, and establishing Korea as a global cultural powerhouse.

Together, the five initiatives will command a 72 trillion won investment package, representing a 41 percent increase from the previous year.

Of the 10.1 trillion won allocated for AI, the government plans to invest approximately 6 trillion won over the next five years in AX, a term referring to the integration of AI technologies into core industries such as robotics, automobiles, shipbuilding and manufacturing. This integration will be especially focused on fostering regional innovation hubs.

An additional 900 billion won will fund the AX Sprint 300 project, which aims to apply AI to 300 everyday consumer products.

In the public sector, 200 billion won will be used to support AI integration in areas such as welfare, tax services, clinical testing, patrol operations and wildfire detection.

To strengthen skill development, 100 billion won will be invested in training 11,000 advanced AI professionals and expanding AI education across all age groups.

As for new growth engines and R&D, the government will increase related spending from 36.4 trillion won in 2025 to 44.3 trillion won in 2026.

Notably, R&D funding will rise by a record 19.3 percent to accelerate innovation in six key sectors — AI, biotechnology, cultural content, defense, energy and manufacturing.

To nurture strategic industries, the government will mobilize 100 trillion won in growth funds over the next five years, including 1 trillion won in 2026.

An additional 2 trillion won will be contributed to support promising small- and medium-sized enterprises and startups through tailored growth programs.

In response to increasing trade uncertainty, 4.3 trillion won will be earmarked next year to strengthen resilience in the global trade environment, up from 1.6 trillion won in 2025.

That figure includes 1.9 trillion won in government funding for institutions like Korea Development Bank and the Export-Import Bank of Korea.

An additional 100 billion won will be allocated to support U.S. tariff negotiations and foster global cooperation in the shipbuilding industry, including maintenance, repair and overhaul services for U.S. naval vessels.

To advance energy transition and carbon neutrality, investment will increase to 7.9 trillion won in 2026, up from 6 trillion won in 2025.

This includes 900 billion won for renewable energy support and 300 billion won for RE100 industrial complexes and AI-powered decentralized power grids.

Up to 1 million won in incentives will be provided to drivers switching from combustion engines to electric vehicles.

A total of 5.7 trillion won, up from the previous 4.2 trillion won, will be allocated next year for the K-Tourism Pass, expanded support for Korean food and beauty products and further global promotion of Korean culture.

The government earmarked 175 trillion won for 2026 to promote shared prosperity across all regions, age groups, income levels and other demographic factors.

This marks a 22 percent increase from the previous year, and includes a focus on strengthening regional universities, addressing population decline and preventing fatal workplace accidents.

In terms of national interests, 5.8 trillion won will be allocated to enhance natural disaster prediction capabilities, while 23.8 trillion won will be invested in modernizing the military with cutting-edge technology.