"Strong policies help Korea navigate uncertain times"

" \n Strong policies help Korea navigate uncertain times \n \n\n \n Korea has recovered well from the pandemic, a testament to its strong economic fundamentals and appropriate policy responses. Economic output has surpassed pre-crisis levels despite multiple waves of infection. \n \n\n \n The recovery was supported by the effective containment of the pandemic, including rapid vaccination last year, and proactive economic policy support, which helped minimize economic scarring, sustain income growth, and maintain financial stability. Given Korea\u2019s high global integration, strong external demand also provided support to the recovery. \n \n\n \n Before the war in Ukraine, Korea\u2019s growth was expected to remain robust this year and next, with inflation projected to gradually return to target by next year, as reflected in the\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDQsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMjA1MTIuNTc4MjIyODEiLCJ1cmwiOiJodHRwczovL3d3dy5pbWYub3JnL2VuL1B1YmxpY2F0aW9ucy9DUi9Jc3N1ZXMvMjAyMi8wMy8yNC9SZXB1YmxpYy1vZi1Lb3JlYS0yMDIyLUFydGljbGUtSVYtQ29uc3VsdGF0aW9uLVByZXNzLVJlbGVhc2UtU3RhZmYtUmVwb3J0LVN0YWZmLVN0YXRlbWVudC01MTU3MTE_dXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPWdvdmRlbGl2ZXJ5In0.F2Jut8y0xLAlTwVTtnvVVkvLVpErl4wfkhUbLN2W4K8\/s\/1181822789\/br\/131236924961-l\" target=\"_blank\" rel=\"noreferrer noopener\">recent IMF report . \n \n\n \n But significant uncertainties were already clouding the outlook, with downside risks arising mainly from pandemic-related disruptions to supply chains, geopolitical uncertainties, and rising interest rates in major advanced economies. \n \n\n \n Moreover, Korea faced domestic downside risks linked to weakening economic activity from rising COVID-19 infections, elevated household debt and real estate prices, and rising inflation. \n \n\n \n The effects of <a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDUsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMjA1MTIuNTc4MjIyODEiLCJ1cmwiOiJodHRwczovL3d3dy5pbWYub3JnL2VuL1RvcGljcy9JTUYtYW5kLVVrcmFpbmU_dXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPWdvdmRlbGl2ZXJ5In0.qkQow8TdwNIqr_8JNdlnIyOEl8JS8q8CbH1xJu-i6NE\/s\/1181822789\/br\/131236924961-l\" target=\"_blank\" rel=\"noreferrer noopener\">Russia\u2019s invasion of Ukraine and related sanctions have exacerbated concerns about stagflation risks. Specifically, the increase in commodity prices, particularly of energy, has been fueling inflationary pressures even as the adverse impact of the war on trading partners and recent developments in China could significantly <a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDYsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMjA1MTIuNTc4MjIyODEiLCJ1cmwiOiJodHRwczovL2Jsb2dzLmltZi5vcmcvMjAyMi8wNC8yNS9hc2lhLWdyb3d0aC1zbG93cy1vbi1jb21tb2RpdGllcy1jb3ZpZC1hbmQtcmlzaW5nLWludGVyZXN0LXJhdGVzLz91dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkifQ.ghL_YRdWTwiS3xFLqIxcfgPDI-7GDX9Vxl4dOUYKLVE\/s\/1181822789\/br\/131236924961-l\" target=\"_blank\" rel=\"noreferrer noopener\">weigh on economic activity in Korea. So far, however, Korea\u2019s recovery appears relatively resilient. \n \n\n \n Against this backdrop, policy normalization remains appropriate, given Korea\u2019s relatively advanced recovery and rising inflation, but the pace should consider the fast-evolving global conditions. \n \n\n \n In particular, the pace of monetary policy normalization should continue to be calibrated to ensure that inflation stabilizes at its target and expectations remain well-anchored. \n \n\n \n Fiscal policy should be broadly neutral while continuing to provide targeted support for affected sectors and vulnerable households, as needed. Macroprudential policies should continue to guard against systemic financial risks, notably to contain the buildup of vulnerabilities owing to a red-hot housing market and elevated levels of household debt. \n \n\n \n As global risks abate, the policy focus should shift to structural reform priorities to reinvigorate potential growth and foster greater inclusion, including in the context of the\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDcsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMjA1MTIuNTc4MjIyODEiLCJ1cmwiOiJodHRwczovL25hbTEwLnNhZmVsaW5rcy5wcm90ZWN0aW9uLm91dGxvb2suY29tLz9kYXRhPTA1JTdDMDElN0NJTWF6bGFuJTQwaW1mLm9yZyU3Q2VlN2Y2MDAwMjIwMjQ5YTE3NTM2MDhkYTM0MjQ5NDJjJTdDODA4NWZhNDMzMDJlNDViZGIxNzFhNjY0OGMzYjZiZTclN0MwJTdDMCU3QzYzNzg3OTYyODk0ODQwNzU2MCU3Q1Vua25vd24lN0NUV0ZwYkdac2IzZDhleUpXSWpvaU1DNHdMakF3TURBaUxDSlFJam9pVjJsdU16SWlMQ0pCVGlJNklrMWhhV3dpTENKWFZDSTZNbjAlM0QlN0MzMDAwJTdDJTdDJTdDJnJlc2VydmVkPTAmc2RhdGE9VFVQTjNaYmhZTVZnZ2g1OCUyRnElMkJHUkc0ME9yRXQ2OHdhOW9JT2hXeWRKU28lM0QmdXJsPWh0dHBzJTNBJTJGJTJGZW5nbGlzaC5tb2VmLmdvLmtyJTJGcGMlMkZzZWxlY3RUYlByZXNzQ2VudGVyRHRsLmRvJTNGYm9hcmRDZCUzRE4wMDAxJTI2c2VxJTNENDk0OCUyNnV0bV9tZWRpdW0lM0RlbWFpbCUyNnV0bV9zb3VyY2UlM0Rnb3ZkZWxpdmVyeSZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkifQ.E3gxXzV9JDVI-br0BCTbhQUSAv-_uGNEkCuAk2I4xYI\/s\/1181822789\/br\/131236924961-l\" target=\"_blank\" rel=\"noreferrer noopener\">Korean New Deal . \n \n\n \n This requires recalibrating policies to support productivity growth and innovation. It also demands providing transitory support amid reforms to address product, services, and labor market rigidities, and ensuring that Korea\u2019s human capital remains a central pillar of the transformation process. \n \n\n \n In this context, fiscal policy should be anchored in a medium-term framework that stabilizes public debt, considering the expected implications of demographics, structural transformation costs, and the potential need for additional fiscal support when necessary. \n "

"Strong policies help Korea navigate uncertain times"

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