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Government unlikely to meet 2% inflation target in H1

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Apples are on a display at a traditional market in Seoul, Tuesday. Statistics Korea announced that consumer prices grew 3.1 percent year-on-year in March. Yonhap

Apples are on a display at a traditional market in Seoul, Tuesday. Statistics Korea announced that consumer prices grew 3.1 percent year-on-year in March. Yonhap

By Yi Whan-woo

Chances appear to be slim for the government to lower inflation to its target of 2 percent by the first half of this year, as high fresh produce prices and volatile oil prices persist, adding to inflationary pressure.

Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok said that he expects inflation to stabilize and then head downwards beginning in April, during a visit to an apple farm in Daegu, Monday.

However, some economists remained skeptical, noting that the spike in fresh produce prices is related to the impacts of climate change, which remains out of the government's control.

They also noted the volatility of oil prices globally stems from geopolitical risks, such as the Israel-Hamas military conflict and the war in Ukraine.

"The government may be able to bring down prices of the disputed items to a certain level temporarily," Hanyang University economics professor Ha Joon-kyung said, Wednesday. "And I'd say inflation may persist at over 3 percent throughout the first half."

His comments came a day after Statistics Korea announced that year-on-year inflation stayed above 3 percent for the second consecutive month in March.

Consumer prices grew 3.1 percent last month, following a 3.2 percent increase in February and a 2.8 percent increase in January.

The March reading was attributed to prices of agricultural, livestock and seafood products, which collectively rose 11.7 percent year-on-year.

The 11.7 percent increase marked the steepest growth in prices for those products combined since April 2021, when the figure was at 13.2 percent.

In particular, prices of agricultural products went up 20.5 percent, which accounted for a 0.79 percentage point increase in overall inflation.

Prices of apples surged 88.2 percent, a record level of growth since 1980 when Statistics Korea began to compile relevant data.

To spur the supply of fresh produce and at the same time, lower their prices, the government has been offering financial support with its private sector-driven sales discount campaign. It also has temporarily lowered tariffs on imported fruit.

"All these efforts, however, will succeed in the short term, because shortage in supply of domestic fresh produce comes from warmer temperatures that reduces cultivable areas for popular fruit here," Inha University economics professor Shin Il-soon said.

Concerning oil prices, Dubai crude, Korea's benchmark, rose to $84.18 per barrel on average in March. In December the price stood at $77.33, in January it stood at $78.85 and in February it stood at $80.88.

Consequently, prices of petroleum products went up 1.2 percent year-on-year in March.

This marked the first time since January 2023 that petroleum products reported a year-on-year price gain.

"Under the circumstances, the heightened tension in the Middle East and Ukraine show no signs of letting up and oil prices may continue to move upward," Shin said.

Meanwhile, the finance minister assessed the current level of inflation as being "quite high" considering that many households continue to struggle with the cost of living.

"We will make all-out efforts to achieve a 2 percent level of inflation at an early date," he said.

He also said the government will spare no efforts "to devise measures to improve the country's logistics structure and fundamentally ensure the price stability of farm produce."

Yi Whan-woo


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