Korea's macroeconomic prospects and policy issues for the next decade

Abstract

The purpose of this paper is to evaluate Korea's macroeconomic prospects and policy issues for the next decade. After reviewing the initial conditions, we examine growth strategies, and prospects for growth. Then we discuss external borrowing options and the role of monetary and fiscal policy in the next decade. From the review of Korea's macroeconomic prospects for the next decade we conclude that although the external environment will not be as favorable as in the 1983–1986 period, still the Korean economy will be resilient enough to achieve a 6–7% annual growth rate for the next decade. Areas where new policy actions will be required are in the management of monetory policy and the provision of social welfare. Although we see some increase in the protectionist threat against Korea's exports, we think that the pressures for higher consumption and investment and the less favorable external environment will result in smaller trade surpluses in the years ahead.