[Column] Inflation Measures Hard to Feel... Stirring Public Sentiment

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is presiding over the 1st Emergency Economic Ministers' Meeting at the Government Seoul Office Building on June 19, 2022. Photo by Yonhap News

[Asia Economy Sejong=Reporter Son Seonhee] There was a time when high-ranking economic officials resigned when inflation soared sharply. In July 2008, when the inflation rate hovered around the high 5% range (year-on-year), the Blue House at the time (Lee Myung-bak administration) held then Vice Minister of Strategy and Finance Choi Joong-kyung responsible and dismissed him. Although Minister Kang Man-soo, the head of the economic team, barely kept his position, he stepped down in February the following year after just one year in office. This reflects how strongly inflation was perceived as a ‘government-managed area’ back then.

Now, more than 14 years later, the inflation rate has again surged to the mid-5% range. Furthermore, there is concern it may surpass 6%. This is why the new government’s economic team has made ‘price stabilization’ their top priority and cannot help but anxiously monitor public sentiment.

However, the actual inflation measures presented have had minimal impact. For example, the government proposed the ‘statutory maximum reduction of the fuel tax’ card, but since a 30% reduction was already in place, the additional effect amounts to only 57 won per liter (based on gasoline). Assuming a vehicle with a fuel efficiency of 10 km/l drives about 40 km per day, the monthly additional reduction is only about 7,000 won. The import pork tariff, which is said to be cut by up to 25%, is criticized for its ineffectiveness because about 90% of imported volumes already come from countries with Free Trade Agreements (FTAs) such as the United States and Europe. The effect of the government’s 20% agricultural and fishery product coupons is offset during distribution, leaving actual consumer prices unchanged.

Although Deputy Prime Minister for Economy Choo Kyung-ho and the new government’s economic team have announced various measures as a ‘full-scale response’ to immediately put out the fire, there is a significant gap between these measures and the situation on the ground. The only fortunate aspect is that times have changed, and the market recognizes that the government cannot fully control ‘inflation’ and does not directly hold bureaucrats responsible.

However, the government completely failed to foresee last year’s inflation trend and has already made a first misstep. One wonders whether the new government’s will to curb inflation was truly sufficient, given that it launched with an unprecedented supplementary budget of 60 trillion won. It remains to be seen how long public sentiment will endure the current inflation.

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