The Bank of Korea announced on Sep. 1 that South Korea’s inflation rate has remained below 1 percent for seven months in a row since it posted 0.8 percent in January this year and the rate was 0.6 percent in July this year. For reference, the rate was 1.4 percent in August, 2.1 percent in September, and 2 percent in October last year.
The relatively higher inflation rates for August and September last year were because the prices of agricultural products soared due to a boiling weather and international oil prices jumped at the same time. From July to September 2018, the Dubai crude oil price rose from US$72.6 to US$80 per barrel.
This year, on the contrary, agricultural product prices are showing stability with those of onions and garlic falling and international oil prices are falling as well. As of Aug. 30, the Dubai crude oil price stood at US$59.1 per barrel.
Under the circumstances, South Korea is likely to post a negative inflation rate in the period of August to October this year. “It is a stretch to say that the lower consumer prices attributable to the supply side factors constitute deflation,” said LG Economic Research Institute, adding, “Still, it seems that the South Korean economy is approaching deflation while showing no signs of improvement.”