Inflationary pressure growing amid Ukraine war: finance ministry

Gas prices are seen at a filling station in Seoul in this April 12 photo. Yonhap

The Korean economy is on a recovery track on robust exports, but faces growing inflationary pressure as the protracted war in Ukraine has jacked up energy prices, the finance ministry said Friday.

External economic uncertainties have heightened as global price pressure has risen due to Russia's invasion of Ukraine, while major central banks are expected to accelerate monetary tightening, the ministry said in its monthly economic assessment report, called the Green Book.

"The Korean economy has extended its recovery momentum on exports and an improvement in the job market. But the spread of the COVID-19 variant and the Ukraine crisis are feared to constrain the recovery of domestic demand and price pressure has expanded," the report said.

Asia's fourth-largest economy has been on a recovery path, but it faces growing downside economic risks amid the upsurge in COVID-19 cases and the Ukraine conflict.

Russia's war with Ukraine has driven up crude oil and other major commodity prices, putting upward pressure on inflation. Korea heavily relies on imports for most of its energy needs.

Consumer prices here grew more than 4 percent for the first time in more than 10 years in March amid surging energy costs.

The Bank of Korea (BOK) raised the policy rate by a quarter percentage point to 1.5 percent Thursday, the fourth rate hike since August last year, to put a lid on inflation and household debt.

The BOK said inflation in 2022 is likely to grow at a faster pace than its earlier 3.1 percent projection in February and economic growth could also be slower than the earlier estimate of 3 percent.

The government report showed sales at department stores and card spending increased last month year-on-year in March, but their growth slowed from the previous month amid the upsurge in COVID-19 cases.

Card spending rose 7.3 percent last month, marking the 14th straight month of gains. The tally slightly slowed from a 7.6 percent increase in February.

Sales at department stores increased 4.1 percent on-year in March after rising 5.9 percent in February. But domestic sales of autos slid 16.5 percent year-on-year, a turnaround from a 1 percent rise the previous month.

Last month, the number of daily COVID-19 cases shot up due to the fast spread of the Omicron variant. South Korea's new COVID-19 cases fell to 125,846, Friday, after hitting a record high of 621,179, March 17. (Yonhap)