On the 30th, a customer is looking at a gift set in a large supermarket in downtown Seoul. yunhap news
This year, the annual inflation rate remained at 0.5%. It is the first time in history that inflation has only risen to the 0% level for two consecutive years following last year (0.4%).
The low price this year was, above all, the impact of Corona 19. However, even if the coronavirus outbreak subsides next year, it is difficult to guarantee whether it will escape the low price trend. In addition to the continued contraction of growth, changes in the economic structure represented by digitalization are having a great impact on prices. The Bank of Korea’s inflationary stabilization target has long been set to raise low prices to an appropriate level rather than lowering high prices.
0% level in the second year
According to the National Statistical Office on the 31st, the consumer price index this year was 105.42 (2015 = 100), up 0.5% from a year ago. This is the first time since 1965, when related statistics were written, for the second consecutive year following the 0.4% annual increase rate last year.
Excluding seasonal factors, the rate of increase in core inflation was lower than last year. The’Agricultural Products and Petroleum Exclusion Index’ rose 0.7% from a year ago, the lowest level since 1999 (0.3%). The’Food and Energy Exclusion Index’, the core price index based on the Organization for Economic Cooperation and Development (OECD), also rose only 0.4%. It is lower than last year (0.7%), the lowest since 1999 (-0.2%).
Visual objects_Annual consumer price increase rate
Prices are oil prices and service prices
Low prices are strange to our economy. The annual inflation rate was around 0%, only four times, including in 2015 (0.7%) when oil prices fell sharply, and in 1999 (0.8%) immediately after the financial crisis.
It was Corona 19 that hit the price this year. As global production and trade contracted, oil prices fell sharply, and as people’s face-to-face communication declined, the domestic service industry contracted. The price of petroleum products has fallen to a greater extent (-7.3%) than last year (-5.7%). This is the effect of lowering the price index this year by about 0.3 percentage points.
Personal service prices rose only 1.2%, the lowest level in eight years since 2012 (1.1%). In particular, the price of eating out has fallen from 1.9% last year to 0.8% this year, and it has been 20 years since 2000 (0.8%) that the rate of increase in foreign plant prices reached 0%.
Welfare policy also affected low prices. Public service charges fell by 0.5% last year, followed by a further decrease of 1.9% this year. Electricity, water and gas bills also fell 1.4% this year. This is the effect of the continued expansion of free high school education and the government’s secondary disaster subsidy for communication expenses.
Will the low price become fixed?
Consumer prices have not risen more than 2% even once after recording the last 2% (2.2%) in 2012. It is far below the Bank of Korea’s inflation target (2%).
The government and major research institutes believe that next year’s inflation will not be much higher than this year. The government outlook (1.1%) is the highest, followed by the BOK (1.0%). The Korea Development Institute (KDI) predicts that next year’s consumer inflation rate will only rise to 0.7% and remain at the 0% level for three consecutive years.
In the recently published’Inflation Stabilization Target Operational Situation Check’, the BOK said, “There is great uncertainty over the growth path and inflation forecast due to the re-proliferation of Corona 19.” There is a possibility to have an effect,” he diagnosed.
Sejong = Park Se-in reporter [email protected]
Subscribe to the Hankook Ilbo News Naver Channel
Balance to see the world, the Hankook Ilbo Copyright © Hankookilbo