to flood into the south seeking refuge. this could lead to a national disaster. in this respect, strengthening south - north economic cooperation is obviously a much more desirable option. secondly, we need to rectify the high costs and low efficiency that now characterizes korean society. it is vital to reach a social consensus on improving the climate of labor - management relations and removing the rigidities of the labor market. on the basis of this consensus, we should then work for wage stability. we also have to start to reduce the burden of other social costs. this involves bringing down housing purchase and rental costs through stabilizing house prices. it means educational reforms to cut the exorbitant level of spending on private tutoring. it also implies lowering the costs of the political system by allowing a more productive style of politics to take hold. we should also seek ways to reduce the loss of efficiency caused by the tendency to collective egotism, often found in large - scale national investment projects. thirdly, we will push forward still more passionately in upgrading the industrial structure and improving corporate competitiveness. we have to revitalize the manufacturing sector with a new focus on advanced technology areas generating high value - added, such as the it industry. at the same time, we must also promote deindustrialization or service - oriented industrialization, while giving every encouragement to our financial, logistical, cultural and knowledge - based industries. the share of manufacturing drops in any economy as it moves into a more mature stage of development, while that of the service sector rises. in terms of its weight in their economy, the manufacturing sector peaked in the u. s. in 1953, in japan in 1970 and in korea in 1988. it then showed a steady decline in each case. by upgrading its industrial structure in this way, korea can avoid competing head - on with china, which has huge reserves of low - cost labor, and can instead build up a complementary relationship with it. some form of support will of course be necessary for the sunset industries that are no longer competitive, in order to assist their friction - free market exit through mergers and acquisitions, change of business lines within the country, or relocation overseas. last, but by no means least, we need to promote even more strongly the liberalization and openness of the korean economy. earlier this year, korea concluded, not without difficulty, a free trade agreement with chile. but it is absolutely essential for us to ensure a degree of openness that

well capitalised and well positioned to cope with losses and market stress. households and firms appear to have ample access to credit. we are closely monitoring developments and we are always prepared to take the measures required to safeguard financial stability if needed. let me say a little more about the economic outlook and our assessments. chart 4 persistently high inflation among trading partners inflation is also high among our trading partners, although it has recently moderated a bit. labour markets are tight. with the lifting of pandemic - related restrictions in china and lower energy prices, activity among trading partners will likely be higher than we had anticipated earlier. high inflation has prompted central banks in many countries to raise policy rates to the highest levels since the 2008 financial crisis. over the past year, foreign interest rates have risen more than norwegian rates. combined with the turbulence in financial markets, this has probably contributed to the depreciation of the krone. the krone is now considerably weaker than we envisaged in december. a weaker krone means an increase in prices for imported goods and services in krone terms. this will contribute to sustaining inflation in norway. figure 5. high employment activity in the norwegian economy has been higher than expected. employment is high and unemployment is low. at the same time, we have seen an increase in labour force participation, which is a welcome development. growth in the economy will likely be weaker ahead, but the slowdown appears to be less pronounced than projected in december. the enterprises in our regional network report slightly better prospects than before christmas, but there are wide variations across industries. in the secondary housing market, prices have risen somewhat in recent months, but the number of homes for sale is quite high. new home sales are very low. we expect a modest decline in house prices ahead as a result of higher interest rates. chart 6 wage growth on the rise wage growth is rising and reached the highest level seen in over a decade last year, turning out higher than we had expected. this can be ascribed in large part to a tight labour market and improved profitability in some business sectors. the social partners expect wage growth to rise further this year, and expectations have increased in recent months. wage growth is projected to be around 5 percent this year, 2 / 3 bis - central bankers'speeches which is higher than we projected in december. while wage growth did not keep pace with price growth last year, we expect wage inflation to be slightly higher than price inflation this year. higher wage growth