ABSTRACT
During the years 1986 through 1988, the Korean economy had one of the highest growth rates in the world, averaging well over 12 percent. Before 1989 the Korean economy had relied primarily on export of manufactured goods to achieve growth, but as a result of labor difficulties in export manufacturing sectors, goods produced for export became less competitive on the world market. Compared with the performance of the Korean economy in other years, including 1986–1988, the year 1989 saw a number of developments that cannot be sustained in the long run. The shift in expenditures from export-led growth to domestic demand-led growth was motivated by the substantial deterioration of Korea’s competitiveness. With the marked appreciation of the won, the sharp increase in nominal wages, and the slowdown in productivity growth, the competitiveness of Korea’s exports has become a critical issue.
