five years to be in the low - 3 % range on an annual average basis, the lowest level since 1990. this suggests that external conditions will present considerable challenges to the korean economy. having said that, one piece of good news is that the semiconductor business is reviving gradually from its downcycle. given that the recovery and upcycle in the it sector usually lasted for over two years, the economy is forecast to continue its recovery driven mainly by exports, with growth rates reaching 2. 1 % this year and 2. 3 % next year. 1 / 5 bis - central bankers'speeches it is very encouraging to see our economy improving, albeit slowly, even when economic growth in major economies is likely to slow this year. excluding the it manufacturing sector, however, the recovery might not be strong enough to be felt by all the people, with the growth rate projected to be only 1. 7 %. inflation is expected to gradually approach the 2 % target, but when it will stabilize at the target still remains uncertain. that is why we are particularly concerned about the hardships faced by vulnerable groups who encounter more challenges due to high inflation and prolonged periods of elevated interest rates. my dear colleagues, last year, most central banks worked toward a common goal, to tackle high inflation, but this year it is anticipated that the policy rate hike cycle in major economies will conclude and policies will differ across countries. in this regard, the bank of korea will have more room to make policy decisions with greater focus on domestic conditions. the economic landscape for this year, as well as the final evaluation of last year's policy implementation performance, will depend on how we do our job this year. in view of this changing economic environment at home and abroad, the bank of korea must put the top priority on price stability while at the same time exploring the best policy mix required for economic recovery and financial stability. finishing up the long inflation fight successfully will be more important than anything. in mountain climbing or a marathon, it is said that the " last mile " indicating the incline just before reaching the summit or the final stretch in a marathon is the most challenging. although inflation will continue to moderate, the pace could be slower than we expect, dragged down by uncertainties with commodity price movements and accumulated upward cost pressures. however, we must, and will, achieve price stability. we will determine the duration of our restrictive monetary policy stance and the optimal interest rate channel needed to bring inflation back on target, based on close monitoring

foster initiative and encourage investment. social dialogue can, and should play a crucial role in promoting acceptance of the policies necessary to bring about this change. the attainment of greater efficiency in the public sector is a key objective because it provides vital support services to the productive sectors of the economy. it must, therefore, become better geared to ensure that the intentions of policy - makers are implemented rapidly and effectively. determined efforts must be made to streamline bureaucratic procedures, eliminate outdated regulations and generally reduce the cost of engaging in any economic activity. the better regulation unit in the office of the prime minister must meet the expectations its creation has raised. failure to do so risks compromising all the efforts being undertaken at both the macro and microeconomic levels to create a modern, dynamic economy. at the national level, moreover, we need to understand that the simultaneous pursuit of economic growth and a high degree of social protection can only be achieved by making our product and labour markets more flexible ; by investing more in people, refining their skills and helping them into work, while introducing an obligation to take up jobs ; and by giving more importance to developing our scientific and technological base. we do not need to look far to see how this can be done. faced with high labour costs in the late 1990s, german companies started restructuring and downsizing. the government meanwhile introduced social security reforms aimed at making the welfare state less expensive, as well as labour market reforms that created incentives for the jobless to work. an awareness developed that the solution to chronic deficits and unemployment could no longer be to cut public investments. as a result, germany ’ s unit labour costs have fallen by 12 per cent since 1999 against those of france. the payoff was significant : the volume of german exports rose by 47 per cent over the same period, compared with 25 per cent in france. the french were not unaware that they, too, had a competitiveness problem. a commission of independent experts led by the former managing director of the imf, michel camdessus, was set up in 2003. reporting earlier this year, the experts concluded that without a change of direction, decline was a real threat for france. they identified two obstacles to growth : first, not enough people worked, and those who did failed to work long enough ; second, the heavy state had become a costly drag on the economy. our own country faces a similar predicament. malta ’ s labour participation rate is among the lowest in the eu at 58 per cent