Many Koreans were surprised by their heating bills this month, as their energy costs went up by some 30 percent compared to last winter, even though people’s home-heating patterns haven’t changed. The problem feels even more pronounced in households with young children, as they cannot choose to drastically reduce the heating of their homes, given the unusual cold spells that have been affecting the Korean Peninsula this winter.
In addition, fares for the subway, buses and taxis are slated to rise as early as April, adding an additional financial burden to households.
With these rather unwelcome developments being propagated by news outlets explaining the expected price hikes in public services and higher energy bills, Koreans’ inflation expectations the rate at which consumers expect prices to rise during the next year have risen again this month.
According to the latest consumer survey released by the Bank of Korea (BOK) on Thursday, Korean consumers’ inflation expectations surveyed as of the month of January stood at 3.9 percent, which is 0.1 of a percentage point higher than the previous month. The survey was conducted on 2,372 households nationwide from January 9 to 16.
The country’s inflation expectations hit a record-high in July last year, when it reached 4.7 percent. The figure continued to hover at around the four percent mark until December, when inflation expectations fell to the three percent mark for the first time last year. December’s temporary fall regarding the expected inflation figure was pushed up again in January this year, mainly due to price hikes for gas, electricity as well as other public utilities.
More than three out of four surveyed Koreans responded that they think utility price hikes will be the key factor that will influence the future inflation rate the most in the country. 33.5 percent of respondents said that they think oil and petroleum products will significantly affect inflation, while 29.2 percent of people who were surveyed expect prices for agriculture, livestock and fisheries to be the most impacted by the future inflation rate.
“It has been analysed that the government’s recent announcements that notified the public of upcoming price hikes regarding public utility rates, including electricity and public transportation fares, have affected consumer sentiment, resulting in the rise in the public’s inflation expectations,” a statistics official from the Bank of Korea said.
Regarding whether the rise of inflation expectations in January would be maintained, the official explained that actual inflation will reflect various other factors as well, such as global and local macroeconomic trends and global oil prices.
The Korean government announced on December 30 last year that it will raise electricity rates by 13.1 won ($0.01) per kilowatt-hour (kWh). Gas rates will be maintained at the current level, yet the government said they will examine the country’s gas bill later this year regarding whether to raise it or not.
“It is unavoidable to raise electricity and gas bills to fundamentally make changes to normalise management at the Korea Electric Power Corporation (KEPCO) and the Korea Gas Corporation (KGC), while securing a stable energy supply,” Lee Chang-yang, minister of trade, industry and energy, said during a press conference at the end of last year.
The Seoul metropolitan government has also officially announced that it is mulling over whether to raise the city’s subway and bus fares by 300 won or 400 won as early as this April. The city’s public transport fares have been frozen for more than seven years.
As taxi fees will also be raised from the start of next month, some market experts expect the country’s consumer price index (CPI) will rise above the 3.5 percent mark, which is the government’s forecast for this year. Some even think that the inflation rate will reach the mid-four percent point.
“It’s likely that the government has underestimated the impacts of price hikes of public utilities on the consumer price index. Currently, there exist strong pressures that push inflation upward from price increases for various goods, besides the utility rate increases,” Lim Jae-kyun, an analyst at KB Securities, said.
https://www.koreatimes.co.kr/www/biz/2023/01/488_344262.html
Category: Korea
