Surging semiconductor exports have boosted growth despite headwinds from the Middle East crisis. Fiscal and monetary policy have supported consumption. Going forward, strengthening the fiscal framework could help achieve long-term sustainability. Reforming rules-based expenditure, including further pension reform, can help. Tax reform can raise revenue and underpin growth by prioritising the Value Added Tax, corrective taxes, the auctioning of emissions allowances, and broadening tax bases. High transaction taxes on immovable property could shift towards recurrent taxes to boost residential mobility. Gains in educational attainment have contributed to Korea's rapid growth. However, adult skills in Korea are below average, with skills deteriorating sharply with age, despite heavy investments in education and private tutoring. Refocusing resources towards education and training more closely aligned with in-demand skills and policies to improve labour market matching would encourage adult and on-the-job learning. Seoul and some urban centres continue to attract younger populations, while more remote areas face population decline, labour shortages and weakening local economies. Spatially targeted policies can break the self-reinforcing cycle between economic concentration, regional decline and low fertility by improving framework conditions in lagging regions, adapting planning and housing policies to demographic realities, leveraging place-based policies and rethinking intergovernmental fiscal frameworks.
SPECIAL FEATURES: TAX REFORM, EDUCATION AND LIFE-LONG LEARNING, REGIONAL IMBALANCES
