[Weekly Outlook] Attention on Whether Consumer Prices Will Rise Above 6% for the Second Consecutive Month

[Asia Economy Sejong=Reporter Dongwoo Lee] Next week (August 1?5), attention will focus on whether consumer prices will continue to rise in the 6% range for the second consecutive month.

According to related government departments on the 31st, the consumer price trend for July will be announced on August 2. So far, both inside and outside the government, the outlook is predominantly for a consumer price increase in the 6% range for two consecutive months following June.

Bang Gi-seon, First Vice Minister of Strategy and Finance, said at the Emergency Economic Vice Ministerial Meeting on the 29th, "July consumer prices are expected to show a 6% increase again due to rising agricultural product prices caused by the monsoon and heatwave." Consumer prices in June rose 6.0% compared to a year earlier, marking the highest increase in 23 years and 7 months since November 1998 (6.8%) during the foreign exchange crisis.

The Bank of Korea will announce foreign exchange reserves as of the end of this month on August 3. As of the end of June, South Korea's foreign exchange reserves stood at $438.28 billion, down $9.43 billion from the end of May ($447.71 billion). The decrease was the largest in 13 years and 7 months since November 2008 ($11.75 billion) during the global financial crisis. This was due to the dollar's strength (rising dollar value, falling won value) reducing the dollar-converted value of foreign currency assets in other currencies, as well as foreign exchange market volatility mitigation measures (market intervention).

Given that the won/dollar exchange rate rose to the 1,320 won level in July due to the dollar's strength, attention is focused on whether foreign exchange reserves have decreased further. On August 5, the Bank of Korea will release the "June Balance of Payments (provisional)." The current account surplus for May was recorded at $3.86 billion (approximately 5.0411 trillion won). The current account turned to a surplus in May after posting a deficit in April for the first time in two years due to rising import prices of raw materials and overseas dividends. However, the May surplus decreased by $6.55 billion compared to the same month last year ($10.41 billion).

The National Assembly's Planning and Finance Committee will receive reports from affiliated agencies on August 1. Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho is expected to be questioned about the 2022 tax reform plan, public institution reform, and regulatory reform measures.