[Yoon Administration's First Livelihood Measure] 'Inflation Near 5%' but Effect Only 0.1%P Drop?... Government Says "It's Not Over"

[Asia Economy Sejong=Reporter Son Seon-hee] The government's recent 'Emergency Livelihood Stabilization Project' encompasses all available measures such as tax and financial support, excluding direct price control methods. However, the actual effect on lowering inflation is estimated to be around 0.1 percentage points per month. Moreover, due to a time lag in policy implementation, the tangible impact is expected to be felt no earlier than September or October. Meanwhile, the inflation rate is projected to surge to the mid-to-high 5% range, making direct damage from high inflation unavoidable for the time being.

On the 27th, Yoon In-dae, Director of the Economic Policy Bureau at the Ministry of Economy and Finance, responded to a question about the inflation reduction effect of this project during a related briefing, saying, "If all the announced policies are delivered to consumers as expected, I think there will be about a 0.1 percentage point effect." He added, "This measure is not a complete or final solution," and stated, "If the burden from rising prices increases further in the future, we will consider additional measures."

The Statistics Korea is scheduled to release the May Consumer Price Index on the 3rd of next month, and both inside and outside the government, the atmosphere already suggests that the inflation rate will enter the 5% range. On the 27th, after a meeting with financial holding company chairpersons, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said in response to reporters' questions about inflation, "We will see inflation rates exceeding 5% in various forms for a certain period."

Concerns have also been raised that about 26 trillion won in cash will be injected into the market through the second supplementary budget (추경) confirmed by the National Assembly, potentially further stimulating inflation. The Ministry of Economy and Finance estimated that the tax revenue reduction from tariff cuts, value-added tax, and individual consumption tax reductions included in this Livelihood Stabilization Project amounts to about 600 billion won. Even when adding the previously announced oil price-linked subsidy (about 300 billion won), the total is only about 900 billion won, which is far less compared to the liquidity being injected into the market through this supplementary budget.

Regarding this, Director Yoon said, "We have considered all possible short-term measures to immediately reduce the burden of food costs," adding, "Therefore, although the tax revenue reduction may not be large, I believe the perceived effect will be significant."

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