Korea to extend fuel tax cut by 2 months amid global uncertainties: finance minister
Finance Minister Choo Kyung-ho speaks during a meeting with reporters in the central city of Sejong, Dec. 12. Yonhap
Finance Minister Choo Kyung-ho said Tuesday the government will likely extend the tax cut on fuel consumption by two months in an effort to curb inflation amid lingering global geopolitical risks.
The government has applied a 25 percent discount on the consumption of gasoline and a 37 percent discount on the consumption of diesel, which were set to expire this year after three extensions, in an effort to curb inflation and to ease the burden on the people amid high global oil prices.
"We still have multiple unstable factors, such as the Middle East circumstances and the oil supply situation, though global oil prices have fallen recently. The government is considering extending the measure for another two months as we need to check how things unfold for some time," Choo said.
Korea depends on imports for most of its energy needs, and nearly 70 percent of its crude oil purchases and 37 percent of its total gas deals come from the Middle East.
Dubai crude, Korea's benchmark, surged to $93.25 per barrel in September, or this year's monthly high, due to the Israel-Hamas war, but had fallen to $83.55 in November.
As of Monday, the average price for December had come to $77.59 per barrel.
In November, consumer prices, a key gauge of inflation, rose 3.3 percent from a year earlier amid high prices of farm goods and energy costs, staying above 3 percent for the fourth consecutive month despite the overall downtrend this year.
Inflationary pressure has eased at a slower pace than earlier expected due mainly to unfavorable weather conditions and geopolitical risks, the minister said, adding that the December reading is also forecast to stay over 3 percent.
"The economy has shown signs of a recovery in the second half of this year, and the fourth quarter is expected to log a 2 percent expansion, which will bring this year's growth to 1.4 percent," Choo said.
The ministry is supposed to announce the growth forecast of its own for next year around the end of December, but the announcement is expected to be postponed until the new minister takes office.
Earlier this month, Choi Sang-mok, former senior presidential secretary for economic affairs, was named the minister nominee to replace Choo, who is widely expected to run for the April general elections.
Last month, the Bank of Korea maintained its growth estimate for 2023 at 1.4 percent, while slashing next year's forecast to 2.1 percent from 2.2 percent.
The central bank expected inflation for next year to come to 2.6 percent in 2024, as prices are forecast to meet its target of 2 percent around the end of next year.
Speaking of the controversial corporate downsizing of products, Choo said the government will soon announce measures to better protect consumers' right to know.
"Shrinkflation is a deceptive act, and such practices should be eradicated as it causes distrust in the market," Choo said.
"The government will not and should not interfere with companies' decisions on quantity and prices of a product. But it is imperative for them to precisely and sincerely notice such information. Our measures will focus on that," he added.
There have been growing public complaints about shrinkflation practices, where companies reduce the quantity of their products without a corresponding price fall while the consumers remain unaware of such changes. (Yonhap)