In the wake of the fall of Lehman Brothers, in the fourth quarter of 2008 and the first quarter of 2009 Korea was faced with its biggest economic challenge since the 1997 Asian financial crisis. The U.S. financial crisis hit the global economy hard, and its consequences spread to developing and emerging economies. The entire world was concerned and fearful about the “Great Recession” and the everdeepening global slump.

Witnessing the crisis unfolding in the world economy, Korea saw its economy was also shrinking at a faster pace. In the fourth quarter of 2008, Korea’s GDP growth contracted by 4.5 percent quarter on quarter. crisis. In the first quarter of 2009, it showed hopeful signs of stabilization with a 0.2 percent GDP growth quarter-on-quarter. In the second quarter, the Korean economy achieved 2.4 percent GDP growth. In the third quarter and fourth quarter, it recorded 3.2 percent and 0.2 percent growth, respectively.

Save for the possibility of a recurrence of unexpected and massive external shocks, Korea is expected to continue to strengthen its growth momentum in 2010. During the last two years, the Korean economy registered a dramatic upswing that brought the nation’s economy back to precrisis conditions. Accordingly, there are policy reasons and other factors that can explain why the Korean economy, compared with other countries’ economies, was poised to present its strength and resilience in time of crisis.