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Korea Economic Snapshot

Going for Growth 2021 - Korea

The pandemic highlighted vulnerabilities of the dual labour market and a weak social safety net. A welfare reform needs to be coupled with policies aimed at increasing employment and job quality, especially for women and older workers, who are often in non-regular jobs and the most affected by the crisis. A more flexible labour market would allow workers to move more easily from crisis-hit sectors to growing industries.

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2021 Structural Reform Priorities

  • Social protection: Strengthen the social safety net and improve the efficiency of the tax system
  • Labour market: Reform employment protection legislation
  • Labour market: Strengthen policies to support employment of women and older persons
  • Competition and regulation: Reduce the regulatory burden on economic activity
  • Environmental policy: Strengthen environmental regulations and price signals

 

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Economic Forecast Summary (December 2020)

Effective measures to contain the spread of COVID-19 have limited the estimated fall in GDP to just over 1% in 2020, the smallest decline in the OECD. Activity is picking up on the back of a rebound in consumption, bolstered by large government transfers to households, and a recovery in exports, led by semiconductors. The sizeable digital and green investments of the New Deal will buttress the recovery. GDP is projected to grow at about 3% per annum in 2021 and 2022, but the recovery remains vulnerable to a further spread of the virus in Korea or abroad until an effective vaccine is deployed in the latter half of 2021.

Policies need to continue supporting households and businesses until the economy is on a firmer recovery path. Relatively low public debt allows an expansionary fiscal policy and the announced fiscal rules will help reinforce long-term sustainability in the face of rapid ageing. Beyond an immediate stimulus to the economy, the New Deal constitutes an opportunity to boost productivity, inclusiveness and green growth. Effective implementation is key and outcomes should be monitored closely to ensure maximum impact.

Economic Survey of Korea 2020

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