A consumer is buying fruits in a marketplace in Seoul
South Korea’s food prices were found to be the highest among the Organization for Economic Cooperation and Development (OECD) countries last year, while utility bills and public fares were at the bottom, a Bank of Korea report showed on Tuesday.
According to a research note by the central bank, Korea’s overall consumer prices, in consideration of the county’s income levels, were on par with the OECD average in 2023.
However, the prices of agricultural and fresh food were 56% higher than the OECD average. Clothing and shoes were 61% more expensive while housing costs were 23% higher.
Specifically, prices of apples, pork, cooking oil and T-shirts, golf course use fees and car rental costs ranked top among the rich country club.
Apple prices, in particular, were three times higher than the OECD average.
UTILITY, PUBLIC FARES AT BOTTOM
By contrast, Korea’s electricity, gas and water bills were found to be 36% lower. Public rates, including public transportation fares, were 27% less, according to the BOK report.
The Bank of Korea’s headquarters in Seoul
City gas rates were in the bottom 30-40% range, while electricity rates were in the bottom 20%.
In case of agricultural products, limited supplies were cited as a reason behind higher prices.
Korea imported only a fifth of its fruit and vegetable needs last year. The percentage compares with the 40-70% range for the US and Europe.
In some cases, fruit and vegetable imports have been blocked to protect the domestic agricultural industry.
GOVERNMENT’S TIGHT GRIP ON PRICES
Industry officials said expensive food prices and dirt-cheap utility and public rates were due to heavy government meddling.
Korea has kept power rates under production costs for years
Price hikes are not limited to Korea but are universal. Nevertheless, the rate of hikes is steeper after manufacturers and food producers froze their prices over the past year in line with the government’s policy efforts to keep inflation under control.
Under tight government supervision, Korea Electric Power Corp. (KEPCO), the state-run utility firm, has barely raised electricity prices for years, keeping energy rates below production costs.
UNSUSTAINABLE
Analysts said Korea’s distorted price structure is unsustainable and if continued, would impose a heavy economic burden on future generations.
The BOK said that if Korea’s food and clothing prices were lowered to the OECD average level, Korean households’ consumption power would rise by 7%.
Bank of Korea Governor Rhee Chang-yong recently said: “Higher agricultural and other food prices cannot be addressed through monetary or fiscal policy measures. The time has come for Korea to continue the current policy to protect domestic producers or find an alternative such as leaving the door for imports wide open.”
By Jin-gyu Kang
josep@hankyung.com
In-Soo Nam edited this article.
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