Harvard economist Kenneth Rogoff warned South Korea’s artificial intelligence (AI) boom could leave the country exposed to a painful reversal, greater economic volatility and fiscal pressure, The Korea Herald reported.
Rogoff said the comments during a panel after lecturing at the Bank of Korea in Seoul Thursday; he teaches economics at Harvard University and previously served as the International Monetary Fund’s chief economist. “There is clearly going to be a bursting of the AI bubble at some point that is going to be very painful,” he said.
He described South Korea as a major beneficiary of the AI expansion, with gains that put it in a stronger position than economies that missed the boom. He cautioned officials to restrain new spending commitments during strong economic periods, saying an advantageous starting point can also lead to bigger public demands.
Rogoff said demand to build AI infrastructure may add to household expenses and increase prices for inputs such as land, minerals and other resources.
He also described a generational divide: wealth and housing are concentrated among older Koreans, while younger workers face exposure to employment disruption from AI. Rogoff said fiscal policy would need to recognize older people’s contributions while keeping prospects open for younger people.
He welcomed the Bank of Korea’s effort to increase the won’s use in cross-border transactions, saying wider use could lower costs and help the economy become more resilient. Rogoff said he did not expect the won to become a global currency, but saw benefits in broader international use.
The warning comes during South Korea’s debate over the 2027 budget and the use of tax gains tied to semiconductors. Lawmakers are weighing a proposed 162.3 trillion won Future Response Fund alongside an 820.9 trillion won spending plan, with the dispute focused on investing the tax windfall or reducing debt, as lawmakers contest the use of semiconductor tax gains.
