South Korea Allocates $71.56 Billion in AI Investments to Counter Economic Slowdown

South Korea has announced a major national initiative to invest heavily in artificial intelligence (AI) as a means to counter economic slowdown and trade pressure, particularly from rising U.S. tariffs and global export volatility. The government, under President Lee Myung, has committed to unveiling a comprehensive AI policy by the second half of 2025, which will focus on 30 key projects across sectors such as automotive, robotics, home appliances, chips, and advanced manufacturing. The plan also includes integrating AI into cultural exports like K-food and K-beauty, as well as advanced materials [1].

The Ministry of Finance emphasized that a transformation into AI is essential for economic revival and has outlined policy packages that include tax incentives, financial support, and regulatory improvements to foster innovation. As part of this broader strategy, the government has allocated $71.56 billion (100 trillion won) for strategic investments, including a $383 million national AI foundation model to compete globally. Additionally, a $35 billion data center project is underway, intended to support South Korea’s AI ambitions and position it as a global leader by 2028 [1].

President Lee has positioned AI as a central pillar of economic and technological development, drawing parallels to South Korea’s postwar success through strategic investment. He has pledged to increase government research funding to $25.23 billion (35.3 trillion won), reversing spending cuts from the previous administration and signaling a long-term commitment to innovation [1]. In a recent statement, Lee expressed confidence in South Korea’s ability to become a top three AI power, despite the country’s projected slowing growth rate, which is forecast to fall below 1% by the late 2040s [1].

To strengthen its soft power and global influence, Lee also announced plans to make South Korea one of the top five cultural powers by 2030. This includes boosting government-backed investments to expand the value of the cultural market to $215 billion (300 trillion won) and increasing exports to $36 billion (50 trillion won). The cultural sector, particularly music, dramas, and webtoons, is being integrated into AI strategies, though industry experts caution that AI poses both opportunities and challenges [1].

A key step in this initiative is the appointment of Ha Jung-woo as South Korea’s first Chief Secretary for AI Policy, tasked with coordinating the government’s AI efforts. The president has also committed to establishing a dedicated AI unit to support national AI initiatives, reinforcing his long-standing advocacy for AI as a national priority. During his campaign, he proposed a $735 billion sovereign AI project built on Korean cultural data and language, highlighting the integration of national identity and technological leadership [1].

South Korea’s approach to AI is part of a broader economic and diplomatic strategy. The government has announced a $350 million investment fund targeting U.S. industries, including advanced manufacturing and shipbuilding, to foster cross-border collaboration and access to critical technologies [2]. Analysts note that South Korea’s AI ambitions align with global trends but face intense competition from the U.S. and China, as well as geopolitical challenges such as U.S.-China tech rivalry and shifting trade policies [4].

The economic outlook for South Korea remains mixed. The government expects 0.9% growth in 2025, down from 2% in 2024, and forecasts a modest recovery to 1.8% in 2026. While export sectors, particularly semiconductors, have shown resilience, long-term uncertainties persist due to trade tensions and global market shifts [1]. The stock market has also reflected volatility, with tech stocks declining amid global AI sector corrections and policy uncertainty [2].

South Korea’s AI-driven economic strategy represents a high-stakes bet to maintain its competitive edge in a rapidly evolving global landscape. The success of this initiative will depend on the government’s ability to sustain investment, foster innovation, and navigate geopolitical challenges. As the country moves forward with legislative and financial plans, the coming months will be critical in determining whether AI can serve as the catalyst for a new era of growth and global influence.

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[1] CoinMarketCap - [https://coinmarketcap.com/community/articles/68a82f2c3fa6d14fe03f00f2/](https://coinmarketcap.com/community/articles/68a82f2c3fa6d14fe03f00f2/)

[2] AInvest - [https://www.ainvest.com/news/strategic-alliances-indo-pacific-navigating-trump-unilateralism-regional-tensions-2508/](https://www.ainvest.com/news/strategic-alliances-indo-pacific-navigating-trump-unilateralism-regional-tensions-2508/)

[4] TS2 Space - [https://ts2.tech/en/ai-stock-frenzy-hits-turbulence-tech-titans-tumble-chip-wars-heat-up-aug-21-22-2025-roundup/](https://ts2.tech/en/ai-stock-frenzy-hits-turbulence-tech-titans-tumble-chip-wars-heat-up-aug-21-22-2025-roundup/)