Inflation was bad and only getting worse

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The wildfires started on March 4 in Uljin, North Gyeongsang, spread to other areas including Okgye-myeon in Gangneung, Gangwon. [YONHAP]

Soaring food prices are hitting Korean wallets, with the conflict in Ukraine and freak weather promising even more inflation.

Food prices had risen sharply around the world since the Russian invasion.

According to the Food and Agriculture Organization of the United Nations (FAO) on March 4, its food price index reached a record 140.7 points in February, up 3.9% from the month. previous year and 24.1% over one year.

The FAO Food Price Index measures the monthly change in world food prices in five categories – meat, cereals, vegetable oil, dairy products and sugar – relative to the average price during the 2014-2016 reference period.

Growing concerns over the war between Ukraine and Russia have pushed up international grain prices, as the two countries are major wheat exporters. The FAO Cereal Price Index rose 3% to 144.8 points from January, and rose 14.8% year on year.

Just as it takes three to four weeks for fluctuations in world crude prices to affect domestic energy prices, rising grain prices are not expected to hit the Korean market immediately, but will after some time. .

Local food manufacturers have raised prices in recent months due to rising raw material, labor and logistics costs, and the upward trend is expected to continue.

The weather is another factor.

This year’s crop year in South America has been significantly affected by abnormal weather conditions caused by a strong La Niña, which refers to the drop in ocean water temperature below normal levels. Maize yields in Argentina and Brazil were particularly affected.

“As world grain price volatility increases, we plan to monitor the supply situation daily,” said a spokesman for the Department of Agriculture, Food and Rural Affairs.

A red flag has already been raised for the prices of certain food products.

Pollack, which relies heavily on imports from Russia, has seen a notable price increase over the past week.

1Economic sanctions imposed on Russia following its invasion of Ukraine are expected to drive up Russian pollack and king crab prices. [YONHAP]

1Economic sanctions imposed on Russia following its invasion of Ukraine are expected to drive up Russian pollack and king crab prices. [YONHAP]

The price of 10 frozen pollack from Russia averaged 51,500 won ($41.7) from Feb. 27 to March 5, up 4% from the previous week, at the wholesale fish market in Noryangjin in Dongjak District, south of Seoul.

Prices for Norwegian salmon, which is imported via Russia, and Russian king crab are also expected to rise.

The worst winter drought in five decades is also expected to boost inflation.

The Korea Rural Economic Institute (KREI) predicts that this year’s onion harvest will decrease by 9.5% compared to the previous year. Yields of onions that were due to be shipped in March and April are likely to remain the same as last year, although the area cultivated was increased by 1.2 percent compared to the previous year.

Potatoes, napa cabbage and white radishes will also be more expensive in the first quarter of 2022, according to KREI.

Wildfires caused by drought could add to inflationary pressure.

Statistics Korea found that the annual increase in consumer prices was 4.1% in 2001, up from 2.3% the previous year, due to a massive forest fire on the east coast in 2000 which lasted eight days. Fresh food prices rose sharply that year, up 7.2% year on year, compared to the previous year’s figure of negative 2%.

Believed to have started on March 4 in Uljin, North Gyeongsang, the forest fires on the east coast are the second largest mountain fire in the country after the one in 2000, according to the Korea Forest Service.

“We struggled to put out the fire because of the worst winter drought in fifty years,” a Korea Forest Service spokesman said.

Statistics Korea announced on March 6 that the price of restaurant meals rose at a record pace in 13 years, with the restaurant meal price index reaching 107.39 in February, up 6.2% on a year. [NEWS1]

Statistics Korea announced on March 6 that the price of restaurant meals rose at a record pace in 13 years, with the restaurant meal price index reaching 107.39 in February, up 6.2% on a year. [NEWS1]

Eating out could also become more expensive due to growing demand, as the government eased social distancing rules from March 5, allowing restaurants, bars and cafes to remain open until 11 p.m.

Restaurant meals became 6.2% more expensive in February compared to the previous month, despite social distancing measures amid the Omicron wave.

In February, Bank of Korea Governor Lee Ju-yeol raised the estimated annual rate of increase in consumer prices to 3.1%, up 1.1 percentage points from the previous estimate, citing “the stronger than expected rise in inflation” and “the [inflation] demand and supply factors.

The Ministry of Economy and Finance’s projection for the annual inflation rate was 2.2%.

Analysts point out that the government has not been consistent in its macroeconomic policies.

“The Bank of Korea raised the base interest rate while the government was releasing money ahead of the presidential election, so the anti-inflationary measures didn’t work,” said Kang Sung-jin, a professor. in economics at Korea University.

“The government should minimize liquidity risk while providing support to financially vulnerable households.”

BY SOHN HAE-YONG, IM SOUNG-BIN [[email protected]]


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