Average Inflation Rate in Q2 Hits Highest in 9 Years... Concerns Over Inflation Amid Domestic Demand Stimulus Measures in Second Half

Citizens shopping at a large supermarket. Photo by Jinhyung Kang aymsdream@

[Sejong=Asia Economy Reporter Son Seon-hee] As prices of agricultural, livestock, and fishery products as well as petroleum products continue to rise, the average inflation rate in the second quarter has exceeded 2% by a wide margin. The government expects the rate of price increase to slow down in the second half of the year, but concerns have also been raised that the 33 trillion won 'super supplementary budget' and other domestic demand stimulation measures could fuel inflation.

According to the recent consumer price trends released by Statistics Korea, the consumer price index in June recorded 107.39 (2015=100), rising 2.4% compared to the same month last year. This marks three consecutive months of inflation significantly exceeding 2%, following 2.3% in April and 2.6% in May. On a quarterly basis, prices rose 2.5% during the second quarter, the highest increase in nine years since the first quarter of 2012 (3.0%).

By category, agricultural, livestock, and fishery products showed a 10.4% increase, marking six consecutive months of double-digit growth since January. In particular, egg prices surged more than 1.5 times (54.9%) due to a shortage of laying hens caused by the impact of AI (Avian Influenza). Although the government is expanding monthly egg import volumes to increase supply, price stabilization has yet to be observed. Additionally, prices of garlic (48.7%) and red pepper powder (35.0%) also rose sharply.

Prices of petroleum products also saw significant increases due to rising international oil prices. Diesel (22.4%) and gasoline (19.8%) prices both showed double-digit growth. However, the increase in international oil prices based on Dubai crude has narrowed compared to the same month last year, somewhat easing the base effect.

The government forecasts that inflationary pressures will ease in the second half of the year, allowing the annual inflation target of within 2% to be maintained. However, as the government plans to stimulate the economy with a large supplementary budget of 33 trillion won in the second half, there are also expectations that inflationary pressures will intensify accordingly. The government plans to provide support payments of 250,000 won per person to households in the bottom 80% income bracket as early as August or by early September at the latest. Additionally, for the top 20% income group, a credit card cashback of up to 300,000 won per person (100,000 won monthly) will be provided.

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