Ruling party calls for expansionary fiscal policy

The ruling Democratic Party of Korea called for expansionary fiscal policy Tuesday, as expectations rise that the annual budget bill for next year could exceed 800 trillion won ($577.9 billion) for the first time.

President Lee Jae Myung said in a Cabinet meeting at Cheong Wa Dae that South Korea should not “make a mistake” of fixating on “managing fiscal capacity.”

“We must take advantage of our increased fiscal capacity … and transition to a productive fiscal strategy,” Lee told the Cabinet.

His remarks followed a meeting between Budget Planning Minister Park Hong-keun and Democratic Party lawmakers on increased state spending at the National Assembly the same day.

“At a time when South Korea is entering a period of low growth, we focused on how South Korea could achieve a sustained rebound and how the fruits of growth could spread to young people, small business owners and marginalized people,” Park said.

Earlier in July, Park said in a ministerial-level meeting convened by President Lee that the annual budget for 2027 will rise by more than 10 percent from the initial 2026 budget proposal of 727.9 trillion won, meaning next year’s budget will surpass 800 trillion won, with the largest year-on-year increase since 2009.

Democratic Party whip Rep. Han Byung-do, who attended the meeting, also called for “wise solutions” to meet various fiscal needs.

“We must concentrate our fiscal capabilities on securing leadership in future industries,” Han said.

The government and the ruling party declined to disclose the size of the next year’s budget, but on Tuesday offered a glimpse at the 2027 national budget bill.

The ruling party laid out five major themes of the upcoming budget scheme: Supporting the Lee Jae Myung administration’s signature “three megaprojects” to boost artificial intelligence capacity, securing additional growth engines, support for young people, achieving inclusive national economic growth and ensuring people’s safety and peace.

In this vein, the party is seeking full tuition support for students at regional national universities; “proactive” state support for the country’s lunar landing project and autonomous driving technologies; and all-time high subsidies for the purchase of electric vehicles as part of next year’s budget, according to Democratic Party Rep. Jung Tae-ho.

For the three megaprojects aimed at boosting the nation’s artificial intelligence capability and rebalancing regional growth, spending on support for the semiconductor chip industry will be allocated as “special account” under the National Finance Act, Jung said.

The figure is scheduled to be announced at a Cabinet meeting on Sept. 1 and presented to the National Assembly on Sept. 3. The National Assembly’s deadline for passing the budget bill at a plenary session is early December.