The COVID-19 pandemic triggered global inflation. While concerns about the disease subsided, the impact on the economy has shown no signs of reversing. Since January, ordinary citizens have been stung by rising cost of living. The pinch is being felt by ordinary households, restaurants, and store owners alike. Public utility charges have seen the sharpest increase in years. A few months ago, basic staple items like instant noodles and milk, saw price increases for the first time in many years shocking consumers with the rapid cost escalation. As a result, the fear of on-going inflation is growing among citizens as they wonder what will increase next?
Current inflation rates are a result of many factors. Looking back on last year, the Russia-Ukraine war which began in early 2022 and is still ongoing, is the most critical factor affecting the global economic crises. Russia is one of the world’s largest exporters of oil products, however, since the war began, sanctions restricted their ability to export crude oil products to other countries and at the end of last year, Putin further banned the export of oil to countries that supported a price cap on the resources. Countries that imported Russian oil have suffered from the sudden cut in supply. Korea too has been impacted by the sharp rise in oil prices. This has also led to an increase in public utility charges. South Korea recorded its highest increase in the cost of utilities since 1998. The prices of 'electricity, gas, and other fuel’s rose 31.7 percent from the same month last year to a level we have not seen since April 1998, which recorded 38.2 percent increase. Gas charges had been frozen for nearly two years from 2020 and began to rise again in April 2022. The rate of increase rate was about 38 percent from April to October. District heating costs also rose around 34 percent from January last year. Shop owners who use more space than residential facilities were notified of more burdensome charges. Studio apartments with relatively smaller areas could also not avoid the heating cost bombshell. Overall, public utility charges have experienced a steep increase compared to last year, adding stress to the lives of all citizens.
|▲ A January electricity bill is stuck in a mailbox at a villa in Seoul. (Photo from Yonhap News)|
The cost of dining out is also on the rise. According to Statistics Korea, the rate of increase in food service prices reached 7.7 percent in January this year. This is the highest recorded rate in 31 years since the 14.4 percent increase in 1992. Citizens are not willing to consume any products in this current unstable market raising concerns over the possibility of stagflation, a period where an economy experiences high rates of inflation coupled with slow economic growth and high unemployment.
The government also announced a possible increase in the price of public transportation. Korea’s largest 17 cities are examining the case for an increase of public transportation fares. The public is expecting fares to increase by 300 won or 400 won from April. Users are currently looking into ways to save money on public transportation through credit cards that offer the usage benefits or thrift transportation cards. Basic fees for medium-sized taxis increased by 1,000 won from 3,800 won to 4,800 won since February 1, which is roughly 26.3 percent more than what riders paid last year. Following Seoul’s lead, Gyeonggi-do is planning to increase their taxi fees in the first half of 2023. Basic fees for deluxe and the jumbo taxis will be increased from 6,500 won to 7,000 won. Seoul has also moved up the night ride premium period by two hours, with the higher rate now kicking in at 10 p.m. instead of midnight.
According to ‘the consumer price trend’ of Statistics Korea, the consumer price index last month was 110.11, which is an increase of 5.2 percent from last year. The core price, which is the index excluding agricultural products and oil, shows the flow of prices. The core price has increased by 5.0 percent from a year ago. The index, excluding grocery and energy prices, has increased by 4.1 percent from last year and the consumer price index for living necessities, which consists of items frequently purchased, increased by 6.1 percent. Agricultural products appeared to have decreased following last December, but livestock products and marine products increased each by 0.6 percent and 7.8 percent respectively, as compared to last year. Overall, as public utility charges increase, businesses have no choice but to transfer the costs to the consumer by raising the price of their goods.
|▲ Taxis with higher basic fees are lined up for the first time in four years since 2019. (Photo from The Report)|
To learn more about the overall problem of inflation, the Dankook Herald interviewed Professor Lee Eun-hee from Inha University’s Dept. of Consumer Science. Professor Lee said that the reason for the soaring gas charges is the Korea Electric Power Corporation (KEPCO)'s debt of 9 trillion won and the increase in natural gas prices due to the decrease in natural gas supply caused by the war in Ukraine. However, when asked if there was anything positive, we can take away from the effect of rising prices, she replied that the economic bubble formed in the domestic economy will disappear and consumers will make more rational economic choices. She was also careful to point out that consumers should expect public utility charges to remain high until KEPCO's debt is fully paid. Finally, she said the public should continue to monitor rising prices of food and other commodities and protest any unnecessary increases by companies who have not first rationalized their own operations in an attempt to save money. In the food industry, the government demanded price adjustments eight times, but the suggestions were refused by producers. The professor added, "The government's countermeasures against rising prices cannot be helped in a war-like situation, but they should monitor the supply and demand of items such as agricultural products that directly impact the lives of the people." In other words, Korea, which has a high dependence on imports, is in desperate need of a plan for national imports while it is also important for consumers to make smart choices for consumption in this situation.
In Korea, inflation has impacted most of our necessities in life including, transportation, food and much more. Amid continued inflation the rising costs for public utilities have forced citizens beyond their budget limits. If this situation is to continue, the economic damage will be far reaching. Inflation is not something easily resolved, and finding solutions to overcome the problem is an international issue that everyone should prioritize. People around the world are suffering from this tough economic state. We can only hope to be able to weather this storm long enough for the world to turn things around for the better.
김주연, 황인경, 윤희원, 이은희 email@example.com