At a parliamentary audit of his ministry, South Korean Finance Minister Choo Kyung-ho expressed concern that the ongoing war between Israel and the Palestinian militant group Hamas could lead to an increase in inflation and have a knock-on effect on the nation’s financial market and real economy. In order to manage prices and protect citizens’ livelihoods, the minister promised to take preemptive measures.
Inflation has been gradually slowing in recent months, but in September, consumer prices rose 3.7 percent year-on-year, the highest increase in five months. Global oil prices have been volatile since the beginning of the conflict, and the Bank of Korea (BOK) has kept the key interest rate at 3.5 percent since January 2023. Choo noted that the war has not yet caused major disruptions in energy supplies, but warned that there is a risk of further difficulties with inflation, and potential hikes in oil prices could cause market and foreign exchange volatility, and have a detrimental effect on the real economy.
In response, the government will strengthen its monitoring of the market and take preventative action. It has also extended the tax cut on fuel consumption until the end of the year, and plans to increase the supply of agricultural products and provide discounts to stabilize the public’s finances.
The minister also pledged to support exporters by providing 365 trillion won (US$268.89 billion) in trade financing in 2023, and offering additional tax benefits for corporate investment. Exports have been in decline for the past twelve months, but the third quarter saw a slight rise due to increased global demand for semiconductors. Choo expects exports to begin to improve in October, which would double the country’s economic growth from 0.9 percent in the first half of the year to 1.4 percent for the full year.