If next year’s budget delivers no real results, only national debt will grow

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If next year’s budget delivers no real results, only national debt will grow

Published: 01 Dec. 2025, 00:04

Audio report: written by reporters, read by AI

Kim Woo-cheol

The author is a professor of the Department of Taxation at the University of Seoul and a member of the Reset Korea economic subcommittee.

The government’s 2026 budget proposal sets total spending at 728 trillion won ($496 billion), an 8.1 percent increase from a year earlier. Expanding the budget at the cost of a large deficit reflects an aggressive fiscal stance that risks overreach. The stated priorities of the plan are strikingly similar to those of the Yoon Suk Yeol administration’s first budget, which emphasized creating a “happy society for all, a dynamic economy and a global, pivotal state.” The resemblance raises questions about whether the fiscal expansion offers anything more than a larger frame.

Finance Minister and Deputy Prime Minister Koo Yun-cheol attends a plenary session of the National Assembly’s Special Committee on Budget and Accounts in Seoul on Nov. 6, where he delivered a briefing on the government’s 2026 budget proposal. The committee began its full review of the bill that day. [YONHAP]

It is, therefore, important to examine how the increased spending will actually be used. Government documents frame the budget expansion around “technology-led hyper-innovation, an AI transformation and broad economic innovation.” Korea has chased the rhetoric of innovation for more than a decade with little lasting achievement. The new plan seems intended to break that pattern, but it lacks a clear strategy.

It is unrealistic to believe that goals such as digital economic transformation or joining the ranks of the world’s top three AI powers can be secured simply by adding 5.7 trillion won to research and development spending or by raising industrial expenditures by 4.1 trillion won. Such expectations resemble a mirage. The real test lies not in slogans that justify higher spending but in the substance of the projects that receive funding.

AI investment is positioned as a core priority. Although the allocation is three times larger than last year, the 10.1 trillion won planned for AI-related spending amounts to only about 3 percent of the combined capital expenditure of the four largest U.S. AI firms last year. The figure is too small to claim early-mover advantage. Even domestic conglomerates remain cautious, given the high risks of the market. Public investment financed through national borrowing is, therefore, unlikely to produce predictable industrial outcomes.

The government’s plan for long-term bulk purchases of H200 and Blackwell graphics processing units (GPUs) illustrates the risks. The project is being advanced without clear guidelines on distribution or user fees. While Blackwell is currently dominant, the release of Rubin, a new architecture expected next year, may reshape the market. Google’s tensor processing unit also remains a major variable.

The rapid depreciation of AI chips is notorious. By the time the government’s purchase program concludes in three years, most GPUs acquired early in the plan will already be outdated. Replacement demands will inevitably follow. Under such conditions, long-term GPU purchasing risks becoming an expensive miscalculation. In a fast-changing field, it is dangerous for the public sector — which makes decisions on annual budget cycles and lacks deep technical expertise — to imagine that it can lead the private sector. Treating AI investment like a multiyear construction project is a fundamental mistake. The budgeting process has been rushed, oversight mechanisms remain weak, and even preliminary feasibility studies have been waived for large-scale projects.

The key issue for the expanding portfolio of research and development (R&D) programs is how to improve quality. The plan to abolish preliminary feasibility studies in the name of speed and creativity, replacing them with performance evaluations after the fact, will fail unless the new R&D Innovation Evaluation Committee under the Ministry of Science and ICT establishes strong, independent monitoring. Consolidating national research projects into larger units is a step forward. Yet, the government continues to allocate funds to nearly 2,000 small individual projects, which risks fragmentation and inefficiency. A broader review is needed.

Democratic Party floor leader Kim Byung-kee (top right) and People Power Party floor leader Song Eon-seog (top left) talk ahead of a closed-door meeting at the National Assembly in Yeouido, Seoul, on Nov. 30. The two parties are holding final negotiations on next year’s budget and related bills through meetings between their floor leaders. [NEWS1]

Support programs for small business owners also require recalibration. Continuing the past approach of repayment delays and refinancing loans focuses only on short-term survival. These measures do little to improve business conditions or address structural vulnerabilities. Instead, they risk increasing household debt and adding pressure to public finances.

The nationwide expansion of local gift certificates raises similar concerns. Differences in regional economic conditions and consumer behavior are largely ignored, and the program risks being reduced to a simple central government subsidy. The pilot rural basic income program also lacks broad public consensus, clear policy objectives, and credible evaluation methods. No initiative can be sustained without a clear financing plan.

With the legal deadline for passing the budget approaching on Dec. 2, the National Assembly must conduct a rigorous review. Without concrete results, only the national debt will grow.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.