% to 2. 25 % on july 9 this year after keeping it on hold for 17 straight months. consideration was given to the possibility of mounting upward price pressures against the background of business activity ’ s continued increasing trend. the scale of this recent rise in the interest rate being moderate and to some degree factored in, it is not considered likely to have any great impact on the financial and housing markets or on the household and corporate sectors. fiscal policy the government implemented active fiscal stimulus measures to ward off an overly - deep recession in the real economy. total additional fiscal spending and tax cuts directly and indirectly related to the financial crisis amounted to 38. 8 trillion won in 2009. → the fiscal expansion associated with crisis - related discretionary measures amounted to 3. 7 % of nominal gdp, larger than that in both the u. s. and the u. k., the epicenters of the financial crisis. fiscal policy for 2010 is being implemented in such a way as to support the economic recovery and improve fiscal soundness. government expenditures for this year will contract to 261. 4 trillion won, 4. 2 % less than last year ’ s ( 272. 9 trillion won ). – the ratio of the fiscal deficit to nominal gdp is expected to decrease from last year ’ s 4. 1 % to 2. 4 %. nevertheless, in order to increase the economic stimulus effect, the disbursement of the budget has been front - loaded like last year ’ s. ii. economic outlook 1. growth looking forward, economic activity appears set to continue on its upward track so that gdp growth for the year as a whole is forecast to rise greatly from last year ’ s 0. 2 % to stand at 5. 9 %. although the government sector policy effects will weaken, the private sector is expected to lead the economic upturn. – the drawing - down of inventories has been almost completed so that we are moving into a phase of intended inventory rebuilding. facilities investment, likewise, should build up swiftly, bolstered by the buoyant business situation in the it sector. – the situation as regards consumption should improve as wage and salary income increases in an improved labor market. gdp growth in 2011 is likely to come in at around 4. 5 %, somewhat lower than this year ’ s. i would add the caveat, though, that no small degree of uncertainty surrounds the course of growth including the possibility of a slowdown of the recovery in major countries and fiscal problems

in european countries. 2. prices the rate of consumer price increases this year will move up from 2. 7 % during the first half to around 3. 0 % in the latter half - year. notably, from q4 onwards, it is forecast to be running above the mid - point of the medium - term inflation target ( 3 % ). demand - side pressures are expected to build up in future because of rising business activity at a time when international commodity prices are themselves continuing on an increasing trend. the rate of increase in the cpi next year is put at 3. 4 %, much higher than this year ’ s 2. 8 %. core inflation, which strips out food and energy prices, is similarly expected to accelerate substantially from this year ’ s 1. 8 % to 3. 1 % next year. there is also a possibility that expected inflation will pick up owing to the acceleration of the rate of price increases. – 3. although the rate of increase in consumer prices dropped back below 3 % from may last year, expected inflation is still running above the 3 % mark. current account turning to the current account, although the underlying surplus will continue, its scale is predicted to narrow gradually owing both to the increased goods imports drawn in by the recovery of domestic demand and to the widening of the services account deficit. the current account surplus is forecast to shrink from last year ’ s 42. 7 billion dollars to 21. 0 billion this year and to around 11. 0 billion next year. → the ratio of the current account surplus to gdp is expected to drop from 5. 1 % in 2009 to 2. 0 % this year and further to 1. 0 % in 2011. iii. future policy tasks 1. monetary policy looking ahead, the bank of korea will conduct monetary policy in such a way as to help the economy maintain price stability, while sustaining sound growth. the outlook is that the improving trend in the usa, china and other major countries will be maintained, even though the pace of the recovery will be slower than expected. in the case of china, the government ’ s targeted 8 % growth is likely to be easily reached both this year and next year. in korea there is a need for vigilance against the possibility of the awakening of inflation expectations among the general public along with the acceleration of price increases. lately the housing market has presented a subdued pattern as transactions have been drying up under the combined impact of the regulation of lending and the expanded supply of public housing while housing