Korea vows 'utmost efforts' to tame prices before Lunar New Year

Government to ease energy cost burdens amounting to 290 billion won for over 3.6 million households

Finance Minister Choi Sang-mok (center) announces the measures over emergency economy at a governmental meeting held at the Government Complex-Seoul in Jongno-gu, Seoul on Tuesday. (Yonhap)

The Korean government announced new measures to curb inflation ahead of the Lunar New Year holiday, including cutting price growth for fresh fruits and vegetables and postponing price hikes for electricity.

With this year's four-day Lunar New Year holiday starting on Feb. 9, Finance Minister Choi Sang-mok announced a slew of measures aimed at stabilizing the livelihoods of ordinary people at a governmental meeting on Tuesday.

“Though the Korean economy has been showing signs of a recovery overall, it will not be easy for people's livelihoods to pick up in the first half of the year, due to the accumulated pressures of inflation and high (interest) rates,” Choi said.

As Choi said, inflation is still far from fully easing out in Korea. Consumer price growth, a key gauge of inflation, stood at 3.2 percent in December, staying above the level of 3 percent for a fifth consecutive month.

Prices usually increase ahead of the holidays, as demand for food items and other products rises. The government aims to bring down the prices of major high-demand goods, putting up a total of 84 billion won ($63 million) in the effort.

As part of the scheme, the government aims to bring down the prices of apples and pears -- two fruits highly in demand during the holidays. On-year price growth will also be controlled to remain under 10 percent.

The government will also raise the cap on the monthly purchase of Onnuri coupons, which are used to buy goods at traditional markets at a discounted price, from 1.5 million won to 2 million won per person.

Electricity bills will also be adjusted to help ease the burden of energy costs on the public.

“We will also postpone a hike on electricity charges for those in vulnerable groups again, as we had done in January and May 2023, which is expected to affect some 3.65 million households to be exempt of 290 billion won,” Choi said.

Additionally, small business owners with annual sales of 30 million won or less will receive 200,000 won in subsidies for their electricity bills. This is expected to cost more than 250 billion won.

The government further plans to administer some 65 percent of this year's budget during the first half of this year to boost the economy.

"During the first half of this year, the government will administer a record of 110 trillion won, more than 65 percent of this year's budget, for projects on social welfare and job creation. It will also implement 15.7 trillion won for social overhead capital (infrastructure) projects to boost the construction economy, which has remained sluggish recently," he added.

To encourage small business owners, the government will cut interest payments on loans taken out from nonbanking financial institutions. Around 400,000 people are expected to benefit from the measure, receiving reductions of up to 1.5 million won.

Similar to previous holidays, expressway tolls will be waived during the holiday period. The government will bring down the prices of public transportation, such as tickets for KTX and SRT trains, by up to 30 percent for people traveling from the provinces to the capital area.

Meanwhile, in light of escalating tensions in the Red Sea, the government plans to dispatch four extra vessels along European routes. In addition, it will raise the cap on the subsidy for international shipments provided to small businesses.

Though Korea has not directly been hit by the crisis, trade costs are expected to increase as carriers are choosing other routes to avoid attacks from Yemen's Houthi militants.

"With Yemen's Houthi rebels having stepped up attacks on ships, geopolitical uncertainties have escalated in the Red Sea," Choi said.

“The shipment of exports and energy imports of oil and natural gas have proceeded as planned. But shipping prices are on the rise and there may be a temporary shortage of shipment capacity.”

By Im Eun-byel(silverstar@heraldcorp.com)