An International Monetary Fund (IMF) team stated on Wednesday that South Korea’s inflation rate is expected to “moderate” and reach the government’s goal of 2 percent by 2024.
In August, prices in the country rose faster than anticipated, with a year-on-year increase of 3.4 percent due to more expensive agricultural and manufactured goods.
Harald Finger, Korea missions chief at the Washington-based organization, pointed out that inflation has yet to be completely eliminated and it is essential for South Korea to sustain a restrictive monetary policy stance for the time being.
The IMF team also restated that South Korea should maintain its restrictive stance of monetary and fiscal policy in the near future. Finger added that the country’s interest rate path should stay data dependent and fiscal policy should normalize to support monetary policy in controlling inflation.
Last month, South Korea’s finance ministry suggested a budget of 656.9 trillion won (US$493 billion) for 2024, up 2.8 percent from this year’s budget of 638.7 trillion won.
Finger maintained the IMF’s 1.4 percent on-year growth projection for the South Korean economy and said growth is likely to improve in the second half of the year. He also recommended South Korea to pursue structural reforms to address emerging challenges, including the population crisis, noting such efforts should include a “rules-based fiscal framework,” along with reforming the pension system and increasing labor market flexibility.