OECD Economic Outlook, Volume 2005 Issue 2

Twice a year, the OECD Economic Outlook analyses the major trends and examines the economic policies required to foster high and sustainable growth in member countries. Developments in major non-OECD economies are also evaluated. The present issue covers the outlook to end-2007. Together with a wide range of cross-country statistics, the Outlook provides a unique tool to keep abreast of world economic developments. In addition to the themes featured regularly, this issue contains an analytical chapter addressing the recent run-up in house prices.
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Korea
Private consumption is now recovering from the protracted adjustment following the collapse of the
household credit bubble in 2002 and exports have begun to pick up. These factors are projected to
boost economic growth from 4% in 2005 to around 5% in 2006-07. Underlying inflation is expected
to increase to the mid-point of the central bank’s 2½ to 3½ per cent target zone in the context of
stronger growth and higher energy prices.
Monetary policy should focus on the medium-term inflation target, accompanied by a flexible exchange rate policy. Concerns about rising housing prices in some parts of the country should be addressed through tax measures and policies to increase supply. Further reforms are needed to address the structural causes of weak domestic demand, notably household debt delinquency.
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