South Korea: Inflation seen around 2% this year – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the prospects for inflation in 2021.

Key Quotes

“South Korea’s headline inflation moderated to 2.4% y/y in June from 2.6% y/y in May, but was below market consensus forecast of 2.5%. This marked the third consecutive month that the inflation rate was above the Bank of Korea’s (BOK) 2% target with low comparison base continuing to contribute to the gains.”

“Core inflation (excluding agricultural products & oils) was unchanged from May at 1.5% y/y, supported by improving domestic demand. This was above consensus forecast of 1.4% y/y. On a month-on-month comparison, the headline CPI fell 0.1% while core CPI rose 0.1%.”

“Headline inflation is likely to hover around or slightly above 2% for the rest of the year, boosted by a low comparison base and elevated energy prices. While core inflation could rise as consumption outlook continues improving, it is expected to be more moderate. Our headline CPI forecast is at 1.9% this year and 1.5% in 2022 (2020: 0.5%). Both the BOK and Finance Ministry forecast inflation at 1.8% this year before