5 - Contours of the High Economic Growth

Summary

The high economic growth was supported by an "aggressive but vulnerable system," with a large current account deficit and the firm-finance nexus tending to produce non-performing loans. It precipitated a crisis in 1972, but the government resolved it with an emergency decree. The government then launched a strong industrial policy backed by expansionary macroeconomic policy through the First Oil Shock, laying the ground for another crisis in 1979. The government carried out disinflation policy in the 1980s, and the high economic growth resumed, now with a lower inflation rate and a smaller current account deficit, culminating in a boom in 1986–1988. However, inflation and the current account deficit returned, though in a milder form. The country sustained the high economic growth by boosting construction investment, and then as facility and intellectual property investments increased to meet the emerging global boom. However, the non-performing loans and capital market openings made the economy vulnerable to crises.