Lee administration unveils expansionary 2026 budget plan

The first budget proposal of the Lee Jae-myung administration has been set at 728 trillion won, an 8.1 percent increase from the previous year. This marks the highest growth rate since the 2022 main budget under the Moon Jae-in administration, which rose by 8.9 percent. It also signals an end to the austerity stance of former President Yoon Suk Yeol’s administration, which had maintained budget growth of only 2 to 3 percent, and a return to expansionary fiscal policy. As a result, national debt is projected to surpass 1,400 trillion won next year, with the debt-to-GDP ratio expected to exceed 50 percent for the first time.

On Aug. 29, the government held a Cabinet meeting presided over by President Lee and approved next year’s budget proposal. The total expenditure of 728 trillion won represents a year-on-year increase of 54.7 trillion won. “Our economy faces two simultaneous challenges: driving industrial innovation led by new technologies and improving an export-dependent structure that is vulnerable to external shocks,” President Lee said. “Next year’s budget proposal is intended to address both challenges at once and serve as a catalyst for recovery and growth through a sweeping economic transformation.”

The government has allocated more than three times this year’s amount, 10.1 trillion won, to artificial intelligence–related spending for next year, while the budget for industry, small and medium-sized enterprises, and energy will rise 14.7 percent to 32.3 trillion won. The budget for health, welfare, and employment has been set at 269.1 trillion won, up 8.2 percent from the previous year, making it the largest among all sectors. Although total expenditure is set at 728 trillion won, total revenue is projected at 674.2 trillion won, meaning most of the required funds will be covered through government bond issuance. As a result, national debt will swell to 1,415.2 trillion won next year, a year-on-year increase of 141.8 trillion won."

Addressing concerns over fiscal soundness, President Lee said, “It would be a mistake to leave a field fallow simply because there are not enough seeds to sow. Common sense dictates that we should borrow seeds if necessary and prepare for farming.” The government will submit the approved budget proposal to the National Assembly in September for review.


Ae-Jin Ju jaj@donga.com