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Inflation in South Korea rises to the highest level in more than 13 years

A vendor counts money at Namdaemun market in Seoul, South Korea. Photo: Reuters.

Consumer prices in Korea rise amid rising energy costs due to Russia-Ukraine conflict and post-pandemic recovery needs.

According to Statistics Korea, consumer prices in South Korea rose 4.8 percent year-on-year in April, after rising 4.1 percent in March. This is the highest rate of increase since October 2008, when Asia’s fourth largest economy was affected by the global financial crisis of 2008-2009.

Consumer prices in South Korea in April outperformed the Bank of Korea’s (BoK) medium-term inflation target of 2%, and posted a 13th consecutive monthly increase.

South Korea’s inflationary pressure is high due to rising oil prices following the crisis in Ukraine and continued disruptions to global supply chains. In addition, prices increased in the context of the economy recovering from the pandemic.

According to Statistics Korea, most of last month’s price hikes were caused by rising prices of petroleum products and the cost of personal services.

Dubai crude, South Korea’s benchmark, averaged $102.82 a barrel in April, up 63.4% year-on-year. Dubai crude oil prices hit a peak of $127.86/barrel on March 9. Korea relies mainly on imports for its domestic energy needs.

High inflation raises the prospect that the BoK will raise the base rate further to curb inflationary pressures and limit household debt.

In April, the BoK raised its base rate by 0.25 percentage points to 1.5%, the fourth rate hike since August 2021.

Last month, the International Monetary Fund lowered its 2022 growth outlook for the South Korean economy to 2.5%, while raising its inflation forecast to 4%.

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