Government Issues Repeated Warnings of "Expanding Inflation Trend"... Likely to Raise Forecasts

Ministry of Economy and Finance Economic Trends (Green Book) April Issue

[Asia Economy Sejong=Reporter Kim Hyewon] The government recently raised its level of concern about the economic situation, stating that both domestic and external risks are restricting domestic demand recovery and that the domestic inflation rate is increasing.

On the 15th, the Ministry of Economy and Finance stated in the "Recent Economic Trends (Green Book) April issue," "Our economy continues to see improvements in exports and employment, but concerns remain about restrictions on domestic demand recovery due to the spread of variant viruses and the prolonged Ukraine crisis, and the inflationary trend has expanded."

Since December last year, the Green Book has indicated the possibility of negative impacts on domestic demand due to COVID-19 for five consecutive months. Notably, mentions related to inflation are the first since February 2011 to January 2012, when the domestic consumer price inflation rate hovered around 4%. This reflects a sense of crisis following last month's inflation figure surpassing the 4% range again for the first time in over a decade.

Externally, attention was paid to the additional impact of China's lockdown measures due to the spread of COVID-19 on the domestic economy. Lee Seunghan, head of the Economic Analysis Division at the Ministry of Economy and Finance, explained, "Externally, amid supply chain disruptions and inflationary pressures caused by Russia's invasion of Ukraine, uncertainties in the global recovery trend have expanded due to lockdown measures in major Chinese cities and the possibility of accelerated monetary policy shifts in major countries."

With increasing uncertainties in both domestic and external conditions, the government is effectively accepting the adjustment of inflation and economic growth rate forecasts around May to June. Earlier, the government presented an economic growth rate forecast of 3.1% and an inflation rate of 2.2% through this year's Economic Policy Direction (Gyeongbang), but these figures are significantly out of line with the current economic situation. The Ministry of Economy and Finance's principle is to officially announce revised forecasts in the mid-June second half Gyeongbang, but considering the importance of the impact on the economy, adjustments immediately after the new government takes office cannot be ruled out. On the 12th, Deputy Prime Minister and Minister of Economy and Finance Hong Namki said at a foreign press briefing, "The International Monetary Fund (IMF) is scheduled to release the World Economic Outlook (WEO) next week, and it is expected that the global growth forecast, including South Korea, will be lowered," adding, "Regarding inflation, the forecast will inevitably be much higher than now."

On the same day, the government additionally announced measures to stabilize prices in the insurance and cultural sectors, such as changes to the automobile insurance mileage special contract. Lee Okwon, chairing the 3rd Policy Inspection Meeting and the 7th Price-Related Vice Ministers' Meeting at the Ministry of Economy and Finance, emphasized, "Due to the spread of variant viruses and concerns over supply chain disruptions, the domestic demand recovery is restricted and inflationary trends are expanding," adding, "We will make every effort to stabilize people's livelihoods through proactive price management."

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