[Economic Outlook] Will Electricity Rates Rise in Q2... LH Land Speculation Prevention Measures Announcement Imminent

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kwon Haeyoung] The government will continue to discuss measures to prevent the recurrence of issues related to Korea Land and Housing Corporation (LH) this week. Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki previously stated, "We are conducting a review with the goal of finalizing and announcing measures to eradicate speculation, prevent recurrence, and innovate LH by the end of this month." This means that the measures are expected to be announced as early as this week or by next week at the latest.

They are also exploring LH innovation plans. Deputy Prime Minister Hong said, "We are thoroughly inspecting all areas including LH's roles and functions, organization and personnel, business structure and implementation, as well as strengthening integrity and ethical management."

◆ 2nd Quarter Electricity Rates to be Announced on the 22nd... Will the Government Block Increases to Control Inflation? = On the 22nd, Korea Electric Power Corporation (KEPCO) will announce the 2nd quarter electricity rates reflecting fuel cost adjustments. Recently, liquefied natural gas (LNG) prices have surged rapidly, and securities analysts predict that if LNG price increases are reflected, the 2nd quarter fuel cost adjustment rate will rise by 2 won per kilowatt-hour (kWh). According to Japan's Ministry of Economy, Trade and Industry, LNG prices jumped from $6.5 per million BTU (British Thermal Unit) at the end of December last year to $16.3 last month.

A key variable is the government's policy to stabilize public utility rates amid inflation concerns. Kim Yong-beom, 1st Vice Minister of Strategy and Finance, stated, "We will manage public utility rates stably in the 2nd quarter to minimize the impact on consumer prices." Electricity rates have a broader economic impact compared to other goods and services. From the government's perspective, they cannot ignore the potential fallout if electricity rates rise, so there is speculation that the 2nd quarter electricity rate increase may be halted.

◆ Bank of Korea to Announce February Producer Price Index on the 24th... Last Year's Korean Social Indicators Also to be Released = On the 24th, the Bank of Korea will release the 'February Producer Price Index.' The producer price index had risen for three consecutive months through January. Prices of agricultural, forestry, and fishery products jumped 7.9% in January, and prices of manufactured goods also increased by 1% due to strong international oil prices. Diesel, naphtha, and gasoline rose by 9.7%, 14%, and 7.5% respectively, showing a clear upward trend in coal and petroleum products. Given the continued rise in international oil, raw material, and grain prices, attention is focused on whether the producer price index rose for the fourth consecutive month in February.

On the 25th, Statistics Korea will release Korea's social indicators for 2020. These social indicators reflect Korean society in terms of population and households/families, health, education/training, labor/leisure, income/consumption/assets, housing, living environment, crime/safety, social integration, and subjective well-being. It is expected to provide a clear overview of various social changes caused by COVID-19 last year.

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