Vice Minister of Economy: "COVID-19 Recovery Trend is a Key Variable in Price Movement"

"Price Drop Due to Plummeting Oil Prices... It's Not Just Our Problem"

Kim Yong-beom, First Vice Minister of Strategy and Finance, is delivering opening remarks while presiding over the 'Macroeconomic Financial Meeting' held on the 2nd at the Bankers Hall in Jung-gu, Seoul.

[Asia Economy Reporter Kwangho Lee] Kim Yong-beom, the 1st Vice Minister of Strategy and Finance, said on the 2nd, "The future trend of consumer prices is expected to be significantly influenced by 'how our economy recovers from the shock of the novel coronavirus infection (COVID-19)."

Vice Minister Kim made these remarks during a macroeconomic and financial meeting held at the Bankers' Hall in Seoul on the same day, in relation to the consumer price inflation rate in May recording a negative figure for the first time in eight months.

In May, consumer prices fell by 0.3% compared to the same month last year, whereas the core inflation rate, which excludes agricultural products and petroleum products and reflects the underlying trend of prices, rose by 0.5% year-on-year, slightly expanding from 0.3% in April.

Vice Minister Kim explained, "The shift to negative consumer prices in May was mainly due to the sharp drop in international oil prices caused by the spread of COVID-19, which significantly lowered petroleum product prices such as gasoline, reducing consumer prices by 0.8 percentage points." He added, "Additionally, under the policy trend of expanding free education and free school meals, local governments' reductions in local public utility charges contributed to lowering consumer prices by about 0.3 percentage points."

He continued, "The expansion of downward pressure on prices is not a problem unique to our country," emphasizing, "As economic activity contraction due to lockdown measures and domestic demand sluggishness on the demand side, and supply-side shocks such as falling oil prices are gradually reflected in prices, a global slowdown in inflation is occurring."

Furthermore, he added, "The significant increase in precautionary savings demand due to the greatly expanded global uncertainty caused by COVID-19 is also acting as a factor restraining inflation in major countries."

Vice Minister Kim stated, "Even experts have differing views," mentioning, "Various opinions have been presented, ranging from a V-shaped recovery that quickly returns to normal trajectory to an L-shaped recovery indicating permanent deviation, as well as Z-shaped, U-shaped, W-shaped, and the Swoosh-shaped recovery, which is intermediate between V-shaped and U-shaped."

He then said, "This means that we are facing a highly uncertain situation where the direction and duration of economic recovery cannot be predicted at all due to the spread of an infectious disease that we did not anticipate." He added, "The government will spare no effort in policy measures to prevent the vicious cycle in which vague concerns about falling prices spread, delaying consumption and investment and leading to a slowdown in growth."

This content was produced with the assistance of AI translation services.