These are hard times for policymakers and businessmen, as a rare phenomenon of inflation growing faster than the economic growth rate has been emerging in Korea. It became clear that Korea has entered the stage of low growth and high inflation, dubbed stagflation.
Stagflation is the most dreaded dilemma facing policymakers.
An attempt to stimulate the economy turned out to be hiking inflation. Another move to curb inflation ended up depressing the economic growth rate. The central Bank of Korea reported that the economy grew by an anemic 2.7 percent in the second quarter of 2001 over the same period of last year, sending a warning signal to the business community. But the inflation rate, as measured by the consumer price index, has already risen by 5 percent from January through July compared to the same period last year. The economic growth rate is far lower than the 3.7 percent recorded in the January-March period.