By Kwanwoo Jun
South Korea's new left-leaning government plans a sizable spending increase next year to support an economic recovery.
The Ministry of Economy and Finance on Friday proposed a 2026 budget of 728.0 trillion won, equivalent to $525.42 billion, up 8.1% from this year. That compares with a 2.5% rise to 673.3 trillion won in 2025.
President Lee Jae-myung of the liberal Democratic Party, inaugurated in early June, has eased the prudent fiscal stance of his conservative predecessor, who was ousted in April over a short-lived attempt to declare martial law in December 2024.
The Lee administration has since rolled out more than $20 billion in fiscal stimulus, including an extra budget and cash handouts, to spur private consumption.
The government has emphasized the role of fiscal policy in revitalizing growth and household livelihoods.
A shrinking workforce, weak investment and stagnant productivity are weighing on South Korea's growth potential, Finance Minister Koo Yoon-cheol told a cabinet meeting Friday. Swift extra-budget spending is helping reverse the downturn, he added.
The government budget bill will be submitted to the legislature next week for approval.
The 2026 proposal includes sharply higher outlays to build artificial-intelligence infrastructure and to fund research and development in semiconductors and other high-tech industries.
It sets aside significant financial aid and other support for companies hit by higher U.S. tariffs. Public health, social welfare and employment programs would also see substantial increases.
The ministry plans to issue new debt to help finance the expanded budget spending amid a shortfall in tax revenues. It expects the national debt-to-gross domestic product to remain at the upper 50% range in the coming years.
South Korea's national debt is projected to rise to 51.6% of GDP in 2026 from 49.1% this year, the ministry said. The government's fiscal deficit is forecast to narrow to 4.0% of GDP in 2026 from 4.2% this year, it said.
Write to Kwanwoo Jun at kwanwoo.jun@wsj.com
(END) Dow Jones Newswires
08-28-25 2301ET
