Imported Prices Hit Highest in Over 7 Years... Amid High Inflation Emergency, Deputy Finance Minister Says "All Available Measures Mobilized" (Comprehensive)

Lee Eok-won, First Vice Minister of the Ministry of Economy and Finance, is presiding over the "27th Innovation Growth Strategy Review Meeting, COVID-19 Policy Review Meeting, Korean New Deal Review Task Force, and 22nd Price-Related Vice Ministers' Meeting" at the Government Seoul Office Building on the 13th.
[Photo by Yonhap News]

[Asia Economy Reporters Eunbyeol Kim and Sejong-based Sunhee Son] As international oil prices and raw material costs rise, South Korea's import price level in July reached its highest point in 7 years and 3 months. The year-on-year increase rate was the highest in 12 years and 7 months, indicating sustained inflationary pressure.

According to the 'July 2021 Export and Import Price Index' statistics released by the Bank of Korea on the 13th, last month's import price index was 119.73 (2015=100), up 3.3% from the previous month, marking the third consecutive month of increase. The import price level was the highest since April 2014 (120.89). Last year, oil prices plummeted due to the economic shock caused by COVID-19, and this base effect led to a year-on-year increase rate of 19.2%. This is the highest increase rate in 12 years and 7 months since December 2008 (22.4%).

The rise in import prices was due to increases in international oil prices and raw material costs. In July, Dubai crude oil averaged $72.93 per barrel, up 1.9% from the previous month. By item, raw materials rose 4.6%, mainly driven by mining products (4.8%), and among intermediate goods (3.4%), coal and petroleum products (8.1%) showed a clear upward trend. Crude oil rose 3.9%, liquefied natural gas (LNG) increased 10.7%, and naphtha went up 8.7%.

The export price index in July also rose 3.5% from the previous month to 111.19, marking an eighth consecutive month of increase. Compared to the same month last year, it rose 16.9%. The export price level was the highest since September 2013 (111.38). Manufactured goods rose 3.5% due to increases in coal and petroleum products (6.4%) and computers, electronics, and optical devices (5.3%), while agricultural, forestry, and fishery products increased by 6.0%.

[Image source=Yonhap News]

When import product prices rise, there is a high possibility that domestic consumer price inflation will increase with a time lag. If companies reflect the rise in import prices in product prices, domestic prices will also rise accordingly. With consumer price inflation staying in the 2% range for four consecutive months, there are expectations that the annual inflation rate this year will exceed 2% for the first time since 2012.

With the Chuseok holiday just over a month away and the high prices of major agricultural, livestock, and fishery products continuing, the government has taken special measures. On the day, Lee Eok-won, First Vice Minister of Strategy and Finance, chaired a price-related vice ministerial meeting and said, "Early varieties are being shipped and prices are falling, so Chuseok prices are expected to be lower than last year," but added, "We will mobilize all available means to expand the supply scale of essential goods early through increasing stockpiles and timely releases before Chuseok, as well as expanding import volumes." He further emphasized, "We will monitor the price situation weekly until Chuseok and immediately devise supplementary measures if necessary to ensure that prices of major agricultural, livestock, and fishery products remain lower than the previous year."

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