The Bank of Korea Says "If Supply Bottlenecks Prolong, Inflation Pressure Will Increase"

Report Published on the Impact of Supply Bottlenecks on Inflation

[Asia Economy Reporter Jang Sehee] Although the impact of global supply chain bottlenecks on domestic prices remains limited, an analysis suggests that if these bottlenecks persist long-term, upward pressure on domestic prices could increase.

Lee Dongwon, Deputy Director of the Research Department at the Bank of Korea, and others stated this in the report titled "The Impact of Supply Bottlenecks on Prices" (Issue Note) released on the 21st, which examined the sectoral price effects of global supply chain bottlenecks.

The report assessed the recent situation, stating, "In Korea, price pressures due to bottlenecks are gradually emerging but are still smaller compared to major advanced countries." However, it noted that some sectors cannot be overlooked.

Regarding the energy sector, the report said, "Energy supply imbalances are acting as a direct factor in price increases through rising energy raw material prices," and added, "If prolonged, it is expected to cause supply disruptions in other sectors through power shortages, thereby exerting additional upward pressure on prices."

In the food and beverage sector, it analyzed, "Livestock prices have risen significantly, especially for meat, due to global supply disruptions caused by labor shortages and increased logistics costs," and "This also acts as upward pressure on processed food prices and dining-out prices through increased raw material costs."

It also stated, "Due to shortages of automotive semiconductors and delays in maritime logistics, durable goods prices, centered on automobiles, have risen sharply in major advanced countries," adding, "Although the increase in Korea is limited, the impact of supply bottlenecks is gradually appearing."

Domestically, it forecasted that price pressures caused by wage increases are not high.

The sharp rise in construction material prices was also evaluated as having a limited overall impact on consumer prices. Although the increase in construction material prices has led to higher maintenance and repair costs for residential facilities, its effect on housing costs is minimal.

The report emphasized, "If inflation expectations become unstable due to prolonged supply bottlenecks, it is necessary to be cautious as price pressures from both demand and supply sides could be greater than expected and persist for a long time."

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