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Korea's food inflation surges to third-highest in OECD

Food prices climb nearly 7% in February, outpacing OECD average for first in two years

April 21, 2024 - 16:04 By Kim Hae-yeon
Customers browse for fruits at a supermarket chain in Seoul on Friday. (Yonhap)

South Korea's food inflation spiked to 6.95 percent in February, the third-highest among member countries of the Organization for Economic Cooperation and Development.

The OECD statistics for February announced Sunday reveal that Korea ranks 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 over two years that Korea's food inflation has exceeded the OECD average since November 2021, currently registered at 5.32 percent. The global increase in food prices began after Russia's invasion of Ukraine in February 2022, compounded by high energy prices and severe drought.

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 to some 5 percent by February, on par with the period just before Russia’s invasion of Ukraine.

However, following a drop to 3.81 percent last July, Korea's food inflation has risen once more, consistently staying within the 5 to 7 percent range since October 2023, and surpassed the OECD average in February.

Analysts evaluate that 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 last month, 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 fruit, including bananas and mangoes, in January. Additionally, in April, it extended the measure to include eight more categories, such as kiwis and cherries.

The government has expanded the distribution of Korea Agro-Fisheries & Food Trade Corporation (aT) directly imported fruits to enable consumers to purchase imported fruit at more affordable prices. Since April 4, these fruits have been supplied to over 12,000 areas nationwide at a discounted rate of 20 to 30 percent, according to aT's announcement.

However, fruit is not the sole factor contributing to inflation.

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 his visit to Washington for a G-20 meeting of finance chiefs and central bank deputies, expressing assurance that prices would eventually "stabilize in a downward trend" in the second half of the year, despite heightened uncertainties.