[Weekly Outlook] Will Inflation Enter the 5% Range... Concerns Over Three Consecutive Months of Trade Deficit

Statistics Korea to Announce 'Price Trends' on the 3rd of Next Month... Attention on Whether It Will Record 5% Range
Choo Kyung-ho: "Price Situation Is Not Easy... We Will See Numbers in the 5% Range"
Concerns Over Chronic Trade Deficit... Energy Import Costs Continue to Rise

Highest Inflation in 14 Years... 'Unavoidable Price Increase'
(Seoul=Yonhap News) Reporter Kim Juseong = On the afternoon of the 26th, a notice informing of price increases due to rising prices of ingredients such as flour and cooking oil was posted at a Jeon restaurant in Mangwon Market, Mapo-gu, Seoul.
The Bank of Korea, in its revised economic outlook released that day, projected this year's consumer price inflation rate at 4.5%, considering strong raw material prices, consumption recovery, and supplementary budgets. This is the highest level in 14 years. 2022.5.26
utzza@yna.co.kr
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[Asia Economy Sejong=Reporter Lee Jun-hyung] Statistics Korea will announce the consumer price trends for this month on the 3rd of next month. With the steep rise in inflation continuing, attention is focused on whether this month's consumer price inflation rate will reach the 5% range for the first time in 14 years. Due to geopolitical conflicts such as the Ukraine crisis, energy import costs are also rapidly increasing, raising the likelihood that the trade balance will continue its deficit streak for three consecutive months.

Statistics Korea will release the 'May Consumer Price Trends' report on the 3rd of next month. The prevailing analysis suggests that this month's consumer price inflation rate will exceed 5%. Earlier, on the 27th, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated after a meeting with the heads of the five major financial holding companies at the Seoul Banking Hall, "Although it is difficult to pinpoint exactly, the inflation rate will probably show a figure in the 5% range," adding, "The current inflation situation is not easy."

Bank of Korea Also Forecasts 'Inflation in the 5% Range'... Already Recorded 4.8% Last Month

The Bank of Korea also expects the inflation rate this month to reach the 5% range. Following the Monetary Policy Committee regular meeting on the 26th, Governor Lee Chang-yong said at a press conference, "Statistics Korea will announce the May inflation rate early next month, and according to the Bank of Korea's forecast, it seems it will exceed 5%," adding, "The inflation forecast has significantly increased."

The consumer price inflation rate already reached 4.8% last month, marking the highest level in 13 years and 6 months. Accordingly, the Bank of Korea raised its annual consumer price inflation forecast from the previous 3.1% to 4.5%, an increase of 1.4 percentage points. If the Bank of Korea's annual forecast of 4.5% materializes, it will be the highest inflation rate since 2008 (4.7%).

Statistics Korea will also release the 'April Industrial Activity Trends' report on the 31st. Attention is focused on the impact of domestic and international adverse factors, such as rising raw material prices due to supply chain instability, on the economic recovery trend. The overall industrial production index in March was 117.1, up 1.5% from the previous month. This increase was the highest in nine months since June last year (1.8%).

Cumulative Trade Deficit Approaches 10 Billion Dollars This Year
(Busan=Yonhap News) Reporter Son Hyung-joo = On the afternoon of the 11th, Busan Port's Sinsundae Pier was bustling. According to the Korea Customs Service, export value (provisional clearance basis) from the 1st to the 10th of this month was 16.052 billion dollars, a 28.7% increase compared to the same period last year. The trade balance showed a deficit of 3.724 billion dollars, widening from the 2.211 billion dollar deficit during the same period last year. The cumulative trade deficit up to the 10th of this month reached 9.86 billion dollars, nearing 10 billion dollars. May 11, 2022
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Trade Deficit of $10 Billion This Year... Concerns Over Export Impact

The Ministry of Trade, Industry and Energy will announce the 'May Export-Import Trends' on the 1st of next month. If the trade balance records a deficit this month, it will mark three consecutive months of trade deficits, the first time in 14 years since the 2008 global financial crisis.

The trade deficit from the 1st to the 20th of this month has already exceeded $4.8 billion. According to the Korea Customs Service, the cumulative trade deficit from January 1st to the 20th of this month has increased to $10.964 billion. Considering that the trade balance recorded a surplus of $9.711 billion during the same period last year, the current trade deficit is substantial.

The problem is that the trade deficit trend is likely to continue for the time being. This is because energy prices, including international oil prices, are steadily rising. The main reason for the trade deficit is the rapidly increasing energy import costs. From the beginning of this month to the 20th, import costs reached $43.444 billion, a 37.8% increase compared to the same period last year. In fact, looking at major import items from the 1st to the 20th of this month, the import growth rates of the three main energy sources?crude oil (84%), gas (60.4%), and coal (321.3%)?stood out.

Given this situation, concerns are emerging that the trade deficit could become chronic. If the trade deficit persists, the export-dependent Korean economy will inevitably suffer significant damage. If both the fiscal balance and current account balance deteriorate simultaneously, external credibility may decline, potentially triggering foreign capital outflows.

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