Since the latter part of 1973, the Korean economy has been struck by the twin shocks of sharply increased world prices for the fuel, food, and raw materials it must import in large quantities and the deep recession in the industrialized countries which provide the market for the bulk of its exports. Although Korea's domestic growth performance last year appears quite satisfactory, there was a drastic slowing of growth in the last half of 1974. In December, the government introduced a set of special measures to offset the sluggish demand for exports that had been experienced since mid-year. It expanded the program of export financing and provided loans to exporters. High priority is being given to measures to encourage import substitution, but a lack of natural resources and limited capacity for producing intermediate and capital goods are serious constraints. The uncertainty about the depth and duration of the recession in the industrialized countries makes any forecast of the outlook for the Korean economy in 1975 a highly contingent matter. It is important, however, that the policies pursued be reviewed in the context of the overall state of public finances.