2007 OECD Economic Surveys: Korea 2007

image of OECD Economic Surveys: Korea 2007

This 2007 edition of OECD's periodic Economic Survey of Korea examines key economic challenges now being faced there. After an examination of recent macroeconomic trends, it looks at monetary policy, housing and regional policies, the fiscal situation and public spending in the context of rapid population ageing, and enhancing the globalisation of Korea.

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Assessment and recommendations

Korea’s economy has expanded at a 4.3% annual rate since 2002, lifting per capita income to two-thirds of the OECD average. Despite a stronger currency, growth has been primarily driven by external demand, thanks in part to the continuing development of Korea’s information and communication technology sector and strong demand from China. In contrast, domestic demand has been relatively sluggish, growing at an annual rate of 2% since 2002, reflecting the collapse of the credit card bubble and a deterioration in the terms of trade. Subdued domestic demand and the appreciation of the currency have kept inflation somewhat below the Bank of Korea’s medium-term target of 2.5% to 3.5% since mid-2005, despite higher oil prices.

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