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| The Seoul Metropolitan Government plans to raise basic bus fares in April by up to 400 won ($0.32) from the current 1,200 won. Newsis |
By Anna J. Park
As rising public transportation fees add upward pressure on the general public, consumer prices in Korea are expected to remain at the current range. Some expect inflation in the upper five-percent rate to continue until the start of the second quarter of this year.
The finance ministry and Statistics Korea both expect February's Consumer Price Index (CPI) to post a year-on-year increase rate in the low five percent range, continuing a 5.2-percent increase in January.
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Since peaking at 6.3 percent in July last year, CPI fell to as low as five percent both in November and December. That raised hopes that the country's inflation is being successfully controlled and is slowing down.
But the mounting pressure from rising energy prices and utility fees, as well as public transportation fees, seem to be preventing the rate from falling further in the coming months. While electricity, water and gas fees all rose during the past few months, various provincial governments also conducted major hikes in their transportation fees.
From early this month, the Seoul city government raised the basic taxi fare to 4,800 won ($3.78) from 3,800 won. The Daegu city government also raised its basic taxi fare to 4,700 won from 3,300 won in January. Naju also raised the city's bus fare by 14.3 percent from February.
Given the series of price hikes in public utilities and transportation fees alone, inflation in February is expected to post a year-on-year increase of five percent or even higher.
In addition, Gyeonggi Province is slated to raise its basic taxi fare by 1,000 won to 4,800 won from 3,800 won in March. In April, Seoul plans to raise its subway and bus fares by 20 to 30 percent.
Against this backdrop, the Korea Development Institute (KDI) recently revised its inflation forecast for this year to 3.5 percent from 3.2 percent. The state-run research institute cited that the upward inflationary pressure on the supply side during past year is now being reflected in the country's public utilities and transportation fares.
Some are concerned that China's reopening might also trigger another price surge of international raw materials, if the country's economic recovery is faster than expected. It means supply-side inflationary pressure, which was the main driver of last year's global inflation, could take place again.
Amid such concerns, the government expects the consumer price index could fall back to the four-percent range during the second quarter and further to the three-percent range in the second half of this year.
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