S. Korea may see worse inflation than the one seen during global financial crisis, according to BOK
Updated: 2022-06-22 05:05:45 KST
South Korea may soon see inflation worse than the one in 2008, during the global financial crisis.
The Bank of Korea on Tuesday projected that prices may grow at rates faster than they did in 2008 when prices rose 4.7 percent on-year.
Already, the rate of inflation seen earlier this year was similar to the one seen 14 years ago.
But analysts at the central bank are projecting even greater increases for June - surpassing May's 14 year-high figures.
And it may stay above five percent for the latter half of the year as well.
The increases come on the back of global geo-political and climate related events including Russia's invasion of Ukraine, which has driven up oil prices, and dry weather which has resulted in a hike in grain prices.
"The supply-side effects are showing up as price and wage increases. Also with social distancing lifted, inflationary pressure on the demand side has also increased."
The lifting of social distancing measures led to more people dining out which along with higher demand for processed foods, pushed prices up.
And with that in mind, the Bank of Korea is also concerned about agflation - when a rise in agricultural commodity prices drive up living costs.
"In particular, the agflation phenomenon, caused by rising international food prices is likely to continue for a long time due to its downward rigid and persisting characteristics."
Meanwhile, core inflation - which doesn't count volatile food and energy prices - jumped above 3 percent in April and May.
And with the risk of recession in the U.S. looming large, domestic and international markets may become even more erratic than they are now, heightening risks of steep price rises and sluggish economic growth.
The Bank of Korea says that it'll rely on data and numerous forms of indices to keep monetary policies flexible and adaptable in a risky economic climate.
Kim Yeon-seung, Arirang News