SEOUL (THE KOREA HERALD/ASIA NEWS NETWORK) - The long-awaited year-end festive mood is unlikely to be seen in 2021, as South Korea is beset by a host of negative economic signs and the people are increasingly forced to bear the brunt of the painful developments amid another resurgence of Covid-19.
Asia's fourth-largest economy faces a double whammy of surging consumer prices and shrinking incomes that threatens its recovery from the coronavirus-induced downturn.
Other key indicators both at home and abroad are far from positive. Snowballing household debt is met with a belated tightening of lending standards; a continued rise in tax burdens is likely to put a damper on consumer spending; and exporters confront sudden roadblocks as the new omicron variant is feared to keep the global supply chain clogged for a while longer.
Unfortunately, the Moon Jae-in administration appears to be too perplexed to come up with convincing measures to help the nation out of the deepening woes.
The first and foremost problem is the runaway consumer prices, which jumped 3.7 per cent in November from a year earlier, according to Statistics Korea. The figure marked the fastest on-year increase since December 2011.
The inflation devil is in the details. Prices of petroleum products skyrocketed 35.5 per cent in November from a year earlier, registering the biggest jump since July 2008.
A subindex for living necessities based on 141 items that are frequently purchased by households - a key measure of how consumers actually feel about price hikes - went up by 5.2 per cent.
According to data released Sunday, prices of groceries and nonalcoholic beverages rose 5 per cent on-year in the third quarter, marking the fifth-largest increase among Organisation for Economic Cooperation and Development members, and their prices surged 6.1 per cent last month from a year earlier.
These figures suggest that ordinary consumers are battling surging prices that translate into a shrinking value of their income.
That comes at a time when Koreans' overall income itself is on a downward path. The country's gross national income, or GNI, stood at 470.8 trillion won (S$545.2 billion) in the third quarter, dipping 0.7 per cent from the second quarter, according to the Bank of Korea.
The third-quarter figure marked the first contraction since the second quarter last year. Given that GNI is the total value produced within a country, including dividends and interest profits, the shift to a downward trend of GNI means Korean consumers are seeing their incomes declining.
With less money to spend, Koreans who have taken out loans are also set to pay more in interest, as the Bank of Korea hiked the benchmark rate last month and banks followed up with increases in their lending rates.
As the central bank signals more rate hikes in the coming months as inflation risks mount, the debt service burden, in a nation where household credit reached a record high of 1,844.9 trillion won as of end-September, is only expected to go up.
A bigger problem is that the economic outlook for the remainder of the year remains bleak. Consumer prices are likely to go up sharply in December, as well. The central bank had revised the inflation outlook for this year from 2.1 percent to 2.3 per cent last month, but last week it changed its outlook yet again, saying that inflation would probably hit above 2.3 per cent.
In addition to the painful mix of rising consumer prices and dwindling household income, housing prices are also on the rise in a way that puts more pressure on ordinary people.
Unless a breakthrough is found, the Korean economy might miss the growth target of 4 per cent this year amid the spread of the omicron variant, soaring oil prices and sluggish private consumption.
The government, instead of trying to squeeze more taxes from the public and doling out public funds to dubious and shoddy state projects, is urged to take the current situation more seriously and come up with more viable measures to navigate the nation through the intensifying economic perils.
- The Korea Herald is a member of The Straits Times media partner Asia News Network, an alliance of 23 news media organisations.