Prices Soar as Disaster Relief Fund of '10 Trillion Won' Released... Emergency Measures for Inflation Control in Second Half

Fresh vegetable produce display at a large supermarket in downtown Seoul. [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Son Seon-hee] Last month, consumer prices rose by 2.6%, marking a four-month consecutive increase in the 2% range. Contrary to the government's initial expectation that prices would stabilize in the second half of the year, the annual peak was reached again. Additionally, concerns have emerged that the approximately 10 trillion won COVID-19 coexistence support fund, which will be distributed in earnest starting next month, could further fuel inflation.

According to Statistics Korea on the 7th, the consumer price index last month was 107.61 (2015=100), up 2.6% compared to the same month a year earlier. The rate of increase matched the 2.6% recorded in May, which was the highest in 9 years and 1 month.

In particular, prices of food items such as eggs, garlic, and fruits rose sharply, directly impacting "table prices." Egg prices increased by 57.0% compared to a year ago, and prices of apples (60.7%), pears (52.9%), garlic (45.9%), young radish (21.1%), rice (14.3%), and pork (9.9%) also surged. Accordingly, the living cost index, which reflects perceived inflation, rose by 3.4% compared to a year ago. This is the highest increase in 3 years and 11 months since August 2017 (3.5%).

Meanwhile, the government plans to distribute a coexistence support fund of 250,000 won per person, included in the second supplementary budget, as early as the end of this month or by next month at the latest. Approximately 88% of the population in the lower income bracket will be eligible.

The issue is that such cash support could increase cash liquidity in the market, further driving up prices. There are also concerns that volatility in food prices will expand due to increased demand for seasonal goods ahead of the Chuseok holiday next month.

The government intends to focus all efforts on price management, including expanding imported egg supplies and increasing government stockpiles of agricultural products for the time being. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said, "Since price levels remain high and additional risks such as heatwaves and typhoon damage exist, we will mobilize all available measures, including expanding the supply of seasonal goods, early supply, and increasing import volumes, before Chuseok."

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