The OECD statistics for February released on Sunday revealed that Korea ranked third among 38 OECD member countries in terms of food and non-alcoholic beverage inflation, trailing only Turkey with 71.12 percent and Iceland with 7.52 percent.
This marks the first time in more than two years that Korea’s food inflation has exceeded the OECD average, currently registered at 5.32 percent. The global increase in food prices began after Russia invaded Ukraine in February 2022, compounded by high energy prices and severe drought damage.
Consequently, the average food price increase in OECD countries, which stood below 5 percent in 2021, soared to 16.19 percent by November 2022.
Since then, the rate has swiftly returned to normal, dipping below 10 percent in July of the preceding year and reaching about 5 percent by February, on par with the level just before Russia’s invasion of Ukraine.
READ: South Korea March consumer prices rise 3.1%
However, following a drop to 3.81 percent last July, Korea’s food inflation has started rising again, consistently staying within the 5 to 7 percent range since October 2023, surpassing the OECD average in February.
Prices of fruits
Analysts said the rise in domestic food prices was primarily driven by increases in the prices of fruits such as apples and pears, with apple prices soaring 88.2 percent in March, the largest increase since January 1980 when official statistical reporting began.
To stabilize fruit prices, the government implemented a quota tariff on 21 categories of fruits, including bananas and mangoes, in January. In April, the measure was extended and expanded to include eight more categories, such as kiwis and cherries.
The government has expanded the distribution of imported fruits by Korea Agro-Fisheries & Food Trade Corporation (aT) to enable consumers to purchase imported fruits at more affordable prices. Since April 4, these fruits have been supplied to more than 12,000 areas nationwide at a discounted rate of 20 to 30 percent, according to aT’s announcement.
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However, fruit is not the sole factor contributing to inflation.
Oil price volatility
International oil price volatility and a strong US dollar could further elevate consumer prices, impacting both imported raw ingredients and processed foods like burgers, chocolate, and snacks, analysts say.
As public skepticism mounts, Kim Kwang-suk, head of the research team at the Institute for Korean Economy and Industry, cautioned that the recent upswing in oil prices and the prolonged elevation of the exchange rate could potentially lead to concerns of a “second-round inflation” following the year 2022.
Meanwhile, Finance Minister Choi Sang-mok reaffirmed the government’s position on Friday, after he visited Washington for a G-20 meeting of finance chiefs and central bank deputies, saying that prices would eventually “stabilize in a downward trend” in the second half of the year, despite heightened uncertainties.