Citi: Korea Economics: 2027 Budget Chartbook — KTB Supply Larger Than Expected
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Citi views Korea's 2027 budget as leveraging windfall tax revenue from the semiconductor upcycle to reinforce state-led industrial investment, with the Ministry of Economy and Finance proposing KRW 223tn of KTB issuance in 2027—only slightly below 2026's KRW 226tn and notably above Citi's prior estimate, the supply surprise flagged in the title. The Future Response Fund channels windfall and excess taxes: the government plans to collect KRW 162.3tn in windfall taxes in 2027, fund KRW 45.4tn of extra spending and offset KRW 12.5tn of bond issuance, leaving a year-end fund balance of KRW 104.4tn. Under Citi's scenario (2026 excess taxes of KRW 50tn, 2027 windfall taxes of KRW 162tn, in-year spending of KRW 58tn), the balance could reach KRW 154tn. Fiscal policy stays expansionary: 2027 spending rises 9% y/y, industry/SME/energy outlays jump 30%, and welfare remains about 49% of total spending. The consolidated deficit excluding social security funds narrows to -0.1% of GDP in 2027 (2026: -3.8%) on government arithmetic, but Citi estimates -2.5% to -3.0% excluding the Future Response Fund across 2026–2028; the 2026–2030 plan caps deficits at -2.9% and debt below 49% of GDP. Issuance splits into KRW 96tn net plus KRW 127tn for redemptions; MoFE publishes official 2027 maturity details in late December 2026.