Soaring public utility charges trigger economic vicious cycle – The Chosun Ilbo: Korea Daily

Public utility charges are rising across the board in South Korea. Gas and electricity prices have already risen significantly, and bus fares will rise by W300 (US$1 = W1,255) in late April, along with taxi fares. Subway fares are expected to follow suit. Additional electricity and gas rate increases would be required. But the trend has fueled inflation, rising to 6.3% last July and dropping to 5% in December, before rebounding to 5.2% in January. This is mainly due to a 28.3% year-on-year increase in electricity, gas and water bills last month.

Rising international energy prices make it inevitable that utility bills will rise, while the previous government’s populist cap on utility bills has left state-owned energy companies with huge debt burdens. It makes sense that even though South Korea, which imports all of its oil, has only a third of his EU electricity bill and international LNG prices have tripled his, domestic gas prices have remained unchanged. does not meet Seoul Subway posts losses of KRW 1 trillion annually.

In short, you need to raise your utility bills, but timing is key. It is a contradiction for the government to raise interest rates to try to keep inflation under control, and then to try to fuel inflation by raising all utility bills all at once.

Inflation could lead to a slowdown in consumer spending, which, combined with a surge in exports, could create a vicious cycle of stagflation, in which consumer prices rise in an economic downturn. Governments should take a more nuanced approach and soften the timing of price increases.

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