Contingency plan needed to stabilize people's livelihoods
Many variables threaten the Korean economy this year, but inflation is considered to be the first among them. If the government fails to stem the price spiral in a hurry, inflation is highly likely to ravage the people's livelihoods. According to Statistics Korea, consumer prices rose 2.5 percent last year from 2020, marking the steepest increase in a decade. The government initially estimated the yearly inflation rate to reach 1.5 percent. However, prices kept rising, forcing monetary officials to readjust their estimate to 1.6 percent in June and 2.4 percent in December. Still, the authorities failed to stick to even these revised targets.
Government economists had remained complacent until April when inflation entered the 2 percent range, saying it was due to a base effect caused by the unusually slow price rise of a year earlier. However, the price upsurge showed few signs of slowing down and hit the 3 percent range in October and November. In other words, policy failures fueled inflation. What followed was a public outcry with people complaining that the prices of everything went up, while monthly salaries remained virtually unchanged. Notably, agricultural, fisheries and livestock prices surged 8.8 percent, also hitting a 10-year high, placing a heavy burden on everyday lives.
The problem could grow worse this year. The government has set the price-control target at 2 percent, which appears far from easy to attain given the mounting inflationary pressure. The premiums for privately run indemnity health insurance have already been raised by 16 percent on average, and utility charges, such as electricity and gas bills that have been put on hold artificially, will also go up in April. In addition, the global supply bottleneck is unlikely to end anytime soon, making it difficult to predict the end of the ongoing inflation.
The protracted COVID-19 pandemic has widened the income and wealth gap between the rich and the poor. Already, people's real incomes have been dwindling. If prices soar, too, the pains felt by mid- to low-income families will intensify. By most appearances, this will likely be the year when the difficulties of working-class families become harsher. The government should hurry to work out fundamental countermeasures because there can be no stable livelihood without price stability.
Many variables threaten the Korean economy this year, but inflation is considered to be the first among them. If the government fails to stem the price spiral in a hurry, inflation is highly likely to ravage the people's livelihoods. According to Statistics Korea, consumer prices rose 2.5 percent last year from 2020, marking the steepest increase in a decade. The government initially estimated the yearly inflation rate to reach 1.5 percent. However, prices kept rising, forcing monetary officials to readjust their estimate to 1.6 percent in June and 2.4 percent in December. Still, the authorities failed to stick to even these revised targets.
Government economists had remained complacent until April when inflation entered the 2 percent range, saying it was due to a base effect caused by the unusually slow price rise of a year earlier. However, the price upsurge showed few signs of slowing down and hit the 3 percent range in October and November. In other words, policy failures fueled inflation. What followed was a public outcry with people complaining that the prices of everything went up, while monthly salaries remained virtually unchanged. Notably, agricultural, fisheries and livestock prices surged 8.8 percent, also hitting a 10-year high, placing a heavy burden on everyday lives.
The problem could grow worse this year. The government has set the price-control target at 2 percent, which appears far from easy to attain given the mounting inflationary pressure. The premiums for privately run indemnity health insurance have already been raised by 16 percent on average, and utility charges, such as electricity and gas bills that have been put on hold artificially, will also go up in April. In addition, the global supply bottleneck is unlikely to end anytime soon, making it difficult to predict the end of the ongoing inflation.
The protracted COVID-19 pandemic has widened the income and wealth gap between the rich and the poor. Already, people's real incomes have been dwindling. If prices soar, too, the pains felt by mid- to low-income families will intensify. By most appearances, this will likely be the year when the difficulties of working-class families become harsher. The government should hurry to work out fundamental countermeasures because there can be no stable livelihood without price stability.
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