Upward price pressure likely to keep inflation above 3%

Consumer inflation in Korea is likely to remain above 3 percent in the coming months after rising 3.1 percent year-on-year in February, as a string of factors are causing upward pressure on prices, according to analysts, Wednesday.

The projection was made as the price of fresh food items, such as fruit, vegetables and fish, kept increasing at an accelerated rate for months.

Oil prices also remain volatile due to the war in Ukraine and the now months-long conflict between Israel and Hamas.

In addition, the Seoul government might hike utility fees after the April 10 general elections to tackle the snowballing losses suffered by staterun energy firms after keeping the fees steady to woo voters.

“Risks associated with prices are resulting in sticky inflation and it has a chance to be higher than 3 percent for months in spring,” said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute.

The 3.1 percent year-on-year increase in consumer inflation last month came after it slowed down to 2.8 percent year-on-year in January, snapping a 3 percent growth level for five straight months.

The accelerated inflation in February was mainly associated with the prices of 55 major fresh food items, which rose 20 percent from the previous year.

Such increase, last month, was the highest since September 2020, when the figure was at 20.2 percent.

It was also higher than the pace of growth in the four preceding months — 13.3 percent in October, 13.7 percent in November, 14.5 percent in December and 14.4 percent in January.

Specifically, agricultural products surged 20.9 percent in February, contributing to a 0.8 percentage point increase in overall inflation.

During the same period, prices of apples and tangerines went up a whopping 71 percent and 78.1 percent, respectively, and prices of 18 major types of fruits combined surged to a more than 32-year high of 41.2 percent.

“Fresh foods are major grocery items, and their price increases hint at there being upward pressure on prices,” Joo Won, deputy director of the Hyundai Research Institute, said.

Concerning oil prices, Korea’s benchmark Dubai crude recently rose to $80.88 per barrel, compared to $77.33 in December and $78.85 in January.

Prices of petroleum products fell 1.5 percent in February, following a 5 percent fall in the previous month.

Core inflation, which excludes volatile food and energy prices, advanced 2.5 percent year-on-year in February, the same as in January.

“Under the circumstances, inflation may accelerate after the April general elections,” Lee said, noting the government may resume hiking energy prices after curbing electricity and gas prices in the name of stabilizing the people’s livelihoods.

Under the circumstances, inflation may accelerate

after the April general elections.