Choo says 6-percent inflation possible, calm about 1,300 won

Inflation could hit 6 percent this month, according Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho. If consumer prices rise more than 6 percent on year, it would be the first since the 6.8 percent increase in November 1998.

A customer shops for groceries at a store in Seoul on Sunday. According to Statistics Korea, the average monthly meal costs for a family of four in the first quarter was 1.07 million won, up 9.7 percent year-on-year from 972,286 won. [YONHAP]

Inflation could hit 6 percent this month, according Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho. "Consumer prices could rise 6 percent in June, July or August," he said during a televised interview on Sunday, referring to the on-year rise.

The finance minister added that the government is primarily focusing on stabilizing consumer prices but that inflation will likely continue for an extended period.

He stressed that the current situation is largely caused by external factors.

"We are inevitably being affected by rising international crude oil prices, commodity prices and international grain prices," Choo said.

The finance minister said the situation could only be turned around if international oil prices drop soon.

"It seems for the time being that that will not likely happen," Choo said.

In May, consumer prices rose 5.4 percent on year, the sharpest rise in nearly 14 years.

If consumer prices rise more than 6 percent on year, it would be the first since the 6.8 percent increase in November 1998.

While noting the fuel tax cuts and the lowering of tariffs, he said that companies and workers should help out.

During the Minimum Wage Commission meeting on Wednesday, labor asked for the minimum wage to be increased nearly 19 percent to 10,890 won next year.

"Companies and workers have to cooperate to stabilize consumer prices," Choo said, noting the need for increased productivity.

Despite rising consumer prices, Choo said the government will have no other choice but to increase electricity rates.

Third-quarter electricity rates were to be announced last week, but the government rejected a request for a 3-won-per-kilowatt-hour increase. It asked for the state-owned utility to cut costs.

All seven Kepco top executives including CEO Cheong Seung-il announced on June 20 that they will be returning the performance-based bonuses that they received last year, while bonuses of 440 high-level employees will be cut by half.

Despite the company reporting a 5.8 trillion-won operating loss last year and a 7.8 trillion-won loss in the first quarter, the CEO pocketed 93 million won in bonuses this April while other executives received around 62 million won.

"In the end, we will have to raise electricity rates," Choo said.

He criticized the previous administration's energy policy for the current situation.

Global energy price changes were first used to calculate the rate on a quarterly basis last year, but only small changes have been made.

"Because of bad energy policies over the past five years, we will have to raise electricity prices," Choo said.

The finance minister voiced some concern about the falling won against the dollar.

While noting that won fell much further against the dollar during the late 1990s financial crisis, he said the recent falling value of the Korean won is not an exclusive situation as other currencies have also been falling against the dollar.

"It's difficult to say that 1,300 won itself is a sign of major crisis for our economy," Choo said.

The finance minister noted that the weakening of the won has a psychological impact and causes instability in the financial markets.

"Global foreign exchange market uncertainty is growing, and this psychological uncertainty is not only rocking our own foreign exchange market significantly but having a ripple effect in other economic areas," Choo said. "The authorities will take action according to the rapid changes if these uncertain situations becomes severe."

The finance minister also said the government will be working on increasing working-hour flexibility.

The Labor Ministry on Thursday announced a labor market reform plan to increase overtime flexibility.

President Yoon Suk-yeol said it was not a confirmed finalized version and that he wasn't briefed, despite the Labor Minister Lee Jeong-sik making the announcement.

"The 52-hour workweek has been implement too uniformity and restrictively," Choo said on Sunday. "That's where we see the problem."

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]