The inflation rate in South Korea reached a 24-year high in June 2022 amid rising prices of energy and food. According to Statistics Korea, the Consumer Price Index (CPI) increased to 6% in June 2022 YoY. The increase in CPI is the highest since November 1998 and exceeds the central bank’s 2% target for the 15th consecutive month. The CPI increased in almost every sector, with petroleum products increasing 39.6% and restaurants climbing 8%.
Inflation Rising Globally
Inflation is prevalent throughout the world. The inflation rate of 6.1% in the Philippines in June 2022 was its highest in nearly four years. Inflation in the UK reached a peak at 9.1% in May 2022. In April 2022, inflation in the US increased to 8.3%. The high prices of food and energy are pushing up inflation globally. Food and energy prices have been rising due to supply-chain disruptions caused by the COVID-19 pandemic, followed by the Russia-Ukraine conflict.
Impact on the Economy
Soaring prices are resulting in a decrease in demand, affecting the country’s leading manufacturers such as Samsung Electronics and LG Electronics. In June 2022, overseas sales of South Korean goods recorded their slowest growth in 19 months. Amid rising prices, workers in South Korea have demanded higher wages to keep up with inflation. Hyundai Motor staff plan to strike work after failing to close the gap with management in arbitration discussions mediated by the government. The union asked the Hyundai management to increase the base monthly wage by KRW165,200 ($127) and offer bonuses equal to 30% of the operating profit for the year.
Measures Taken by the Government
The Bank of Korea has taken measures to control inflation and maintain its foreign exchange reserves. The central bank has been selling dollars while managing consistent capital outflow from the stock market to calm investors and prevent the depreciation of the won. In 2022, increasing inflation is the biggest concern for global policymakers. With central banks globally affecting bigger-than-usual interest rate hikes to tame inflation, the Bank of Korea is also expected to raise its key interest rate at the coming meeting.
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