The first main budget proposal of the Lee administration has reaffirmed its commitment to an ‘expansionary fiscal policy.’ A new National Growth Fund will be established to invest in sectors like AI, and the budget will actively include support for issuing regional love gift certificates. The proposal will be finalized in a cabinet meeting on the 29th.
Han Jeong-ae, the policy committee chairwoman of the Democratic Party of Korea, stated on the 26th that the party and the government have reached a consensus on ensuring that the 2026 budget reflects the government’s governing philosophy. The budget is designed to tackle external uncertainties while promoting economic growth and ensuring that fiscal policy plays its proper role.
The government has predicted a GDP growth rate of 0.8% for this year and 1.8% for the next year, with both the party and the government agreeing on the need for proactive fiscal intervention given the economic challenges.
Specific focal areas in the upcoming budget include investments to boost AI capabilities, facilitating services that aid real-life aspects such as entrepreneurship and job-seeking, and expanding investments in future strategic industries like AI, semiconductors, and biotechnology.
Additionally, the budget will include significant R&D investments to foster the six strategic industries—AI, biotechnology, cultural content, defense, energy, and advanced manufacturing. This represents a course correction from the previous administration’s reduction in R&D spending.
Efforts to combat the climate crisis will be bolstered, including the introduction of a ‘conversion subsidy’ for transitioning from internal combustion vehicles to electric vehicles, and expanding support for child allowances.
The budget will also prioritize regional autonomy and growth, support living expenses through measures like regional love gift certificates, and focus on safety and disaster response in industrial settings.
Before the budget proposal is submitted to the National Assembly, a joint consultation between the government and the ruling party was held to ensure alignment. The specific budget amounts for each category will be confirmed after the cabinet meeting on the 29th.
Economic Deputy Prime Minister Koo Yoon-cheol emphasized that the 2026 budget, the first under the Lee administration, is focused on reducing inefficiencies while making bold investments where necessary to drive recovery and growth. The budget’s three key investment priorities are achieving a super-innovative economy led by technology, ensuring a sound society with growth for all, and emphasizing public safety and national interest in foreign affairs and security.