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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

Can Korea Reach Higher Growth?

Can Korea Reach Higher Growth?

JEON Young-Jae

Mar. 31, 2008

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The Korean economy is facing deteriorating external conditions as US economic data becomes bleaker and global inflationary pressure mounts. Exports, Korea's main economic engine, have held up so far, and domestic consumption rebounded in January after falling in late 2007, but the negative effects of the nation's No.2 trading partner and spiking consumer and producer prices are clouding the outlook.

Although the US Federal Reserve has lowered its benchmark rate by 1.25 basis points since January 22, it has not loosened reins of financial institutions roiled by the US subprime mortgage meltdown. In fact, credit tightening is spreading beyond subprime-related financial instruments, suggesting the US woes will be protracted. Furthermore, other US economic indicators point to a recession.

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