Vice Minister Ki Jae: "Concerns about Raw Materials Supercycle Are Premature... Preparing for Short-Term Volatility Expansion" (Update)

Holding the Macroeconomic and Financial Meeting on the 1st... 'Sustained Economic Recovery'
Preparing Measures to Address Inflation at Tomorrow's Vice Ministerial Meeting on Prices

[Asia Economy Reporter Jang Sehee] Lee Okwon, the 1st Vice Minister of the Ministry of Economy and Finance, recently emphasized regarding the market's forecast of a 'commodity super cycle' that "since international commodity prices are influenced by various factors such as the economy, financial market conditions, climate conditions, and geopolitical risks, it is necessary to view them with a long-term and balanced perspective."

On the 1st, at the Macroeconomic and Financial Meeting held at the Seoul Banking Hall, Vice Minister Lee stated, "If volatility expands excessively, it could negatively impact the economy, so we will closely monitor related trends and devise response measures."

Vice Minister Lee explained, "There are opinions that international commodity prices have entered a super cycle as they continue to rise beyond pre-COVID levels," adding, "Many also evaluate this as a natural phenomenon due to economic recovery and consider it a simple cyclical upswing." Considering that international commodity prices will gradually find supply-demand balance through global supply expansion, he assessed that the possibility of exceeding the inflation stabilization target of 2% on an annual basis is limited.

Regarding the recent real economy, he evaluated, "Although production in the manufacturing and all industries temporarily adjusted compared to the previous month in April, most major indicators exceed pre-crisis levels, such as service industry production and retail sales reaching record highs," and "The leading economic index has also risen for 11 consecutive months, showing a continued recovery trend."

He continued, "Despite a decrease of 0.5 working days, exports maintained a solid recovery, increasing by 53.3% compared to the same period last year as of the 20th of last month," and forecasted, "Inflation is also likely to temporarily exceed 2% in the second quarter due to supply-side factors such as oil and agricultural, livestock, and fishery products, combined with a base effect from last year's low inflation caused by COVID-19."

Regarding the May consumer price index, he explained, "Considering that last May's inflation (-0.3%) was very low, the base effect is expected to significantly influence and cause the index inflation to be high." He added, "The domestic financial market is experiencing rising government bond yields due to upward economic outlooks, but overall stability continues thanks to strong external credibility, such as Moody's and Standard & Poor's (S&P) maintaining the country's credit rating."

Meanwhile, the government plans to discuss and announce measures to prepare for rising prices of commodities and agricultural, livestock, and fishery products at the Deputy Ministerial Meeting on Prices scheduled for tomorrow.

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