[Weekly Review] KEPCO Posts 14.3 Trillion Won Deficit in First Half... Employment Growth Slows for Second Consecutive Month

On the 19th, when the announcement on the electricity rate hike was imminent, an electric meter installed in a residential area in Seoul was seen. As prices of major daily necessities and energy soar across the board, and even public utility rates such as electricity, water, and gas increase, these have become key factors driving rapid inflation, deepening the concerns of inflation authorities. If the government accepts Korea Electric Power Corporation's request for an electricity rate hike, there are concerns that the consumer price inflation rate, which has already recorded the mid-5% range, could exceed 6%. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Sejong=Reporter Dongwoo Lee] Korea Electric Power Corporation (KEPCO) posted a loss exceeding 14.3 trillion won in the first half of this year alone. This was due to electricity rates failing to keep pace with the rise in fuel costs such as international oil prices. KEPCO is accelerating asset sales to improve its financial structure, but experts say it is insufficient to resolve the record-breaking deficit.

KEPCO announced on the 12th that its operating loss in the first half of this year was 14.3033 trillion won. Considering that KEPCO posted a loss of 187.3 billion won in the first half of last year, the operating loss increased more than 76 times in just one year. Sales increased by 11.5% to 31.9921 trillion won compared to the same period last year (28.6848 trillion won), while operating expenses rose by 60.3% to 46.2954 trillion won.

The record-high deficit was caused by a sharp rise in fuel costs this year. According to KEPCO, the price of thermal coal in the first half of this year was $318.8 per ton, soaring 221.7% compared to $99.1 per ton in the same period last year. During the same period, the price of liquefied natural gas (LNG) rose 132.7% from 577,700 won per ton to 1,344,100 won per ton. Consequently, the electricity wholesale price (SMP), which is the price KEPCO pays to power producers for electricity, increased by 117.1% to 169.3 won per kWh in the first half of this year compared to 78 won in the same period last year.

Employment Growth Slows for Two Consecutive Months... Employment Increased Most in 22 Years but 60% Are Senior Jobs

The increase in new employment slowed for two consecutive months. Although the number of employed people last month increased the most in 22 years for the same month, about 60% of the newly created jobs were for seniors aged 60 and over. Negative forecasts are gaining weight that the employment recovery trend will weaken due to additional base rate hikes in the second half of this year and economic contraction caused by the resurgence of COVID-19.

According to the 'July Employment Trends' released by Statistics Korea on the 10th, the number of employed people last month was 28.475 million, an increase of 826,000 compared to the same period last year. This is the highest increase for the same month since July 2000 (1.03 million). The employment rate for those aged 15 and over was 62.9%, the highest for the same month since monthly statistics began in 1982.

However, more than half of the new jobs were for seniors aged 60 and over, highlighting limitations in employment quality. The number of employed people aged 60 and over last month was 479,000, accounting for 58% of total employment. This was followed by increases in the 50s (194,000), 20s (95,000), and 30s (62,000), while the number of employed people in their 40s, considered the backbone of the labor market, decreased by 1,000.

Emergency Due to Inflation and Heavy Rain... Government to Release Stockpiled Goods Before Chuseok

The government plans to increase the supply of key food items in preparation for an earlier-than-usual Chuseok holiday and to hold large-scale price discount events for agricultural, livestock, and fishery products involving large supermarkets, online malls, and traditional markets. It will also provide the largest-ever holiday funds to small business owners and SMEs. Additionally, the government is considering waiving toll fees on nationwide expressways during the holiday period and plans to finalize and announce this by the end of this month.

On the 11th, about a month before Chuseok, the government held an emergency economic and livelihood meeting chaired by President Yoon Suk-yeol and announced these Chuseok livelihood stabilization measures. According to the Ministry of Economy and Finance, as of the end of last month, the average prices of 20 major seasonal items such as cabbage, radish, and apples rose by 7.1% (weighted average inflation) compared to last year's Chuseok period. Especially, concerns are rising that agricultural product shipments will decrease due to recent record-breaking heavy rains.

In response, the government plans to release stockpiled goods intensively and apply new tariff quotas (10%) on some items such as onions, mobilizing all available resources to increase supply. It plans to supply 230,000 tons of the 20 major seasonal items, 1.4 times more than usual, to minimize upward price pressure. Yoon In-dae, Director of the Economic Policy Bureau at the Ministry of Economy and Finance, said, "We will manage prices aiming to keep the average price of the 20 major seasonal items during this year's Chuseok as close as possible to last year's Chuseok price levels."

Ahead of Chuseok, there is an emergency regarding the price of food on the table. According to the National Statistical Portal (KOSIS) of Statistics Korea, the food and non-alcoholic beverage price index in July was 113.12 (2020=100), up 8.0% from a year ago. Food prices rose the most in one year and five months since February last year. In particular, prices of processed foods such as edible oils (34.7%) and fresh foods such as vegetables and seaweed (24.4%) increased significantly. Citizens are shopping at a large supermarket in downtown Seoul on the 7th. Photo by Moon Honam munonam@

Prime Minister Han: "Proceed Quickly with Special Disaster Area Declaration for Heavy Rain Damage"

Prime Minister Han Duck-soo said on the 12th regarding the heavy rain damage in the central region, "We will expedite the procedures for declaring the affected areas as special disaster zones."

On the same day, Prime Minister Han chaired a meeting to check the response to the heavy rain at the Government Seoul Office and the Central Disaster and Safety Countermeasures Headquarters (CDSCH) meeting for COVID-19, stating, "The government will do its best to stabilize the lives of residents in the affected areas and support rapid recovery."

He added, "Local governments in the affected areas should promptly complete damage surveys, and the Ministry of the Interior and Safety should expedite the early declaration procedures for special disaster areas for municipalities that meet the declaration criteria."

High Inflation Shakes Even Exports... Stagflation Expected in Second Half

Last month's inflation rate reached 6.3%, the highest in about 24 years, and with the Korean economy recording growth rates in the 0% range for two consecutive quarters, fears of stagflation (inflation combined with economic stagnation) are looming in the second half of the year. Economic experts diagnose that amid growing global stagflation concerns and soaring inflation, even exports, which support the Korean economy, are faltering, increasing the likelihood of a sharp economic slowdown in the second half.

According to Statistics Korea on the 9th, consumer prices rose 6.3% compared to a year ago, the highest increase since November 1998 (6.8%). This is the first time in 23 years and 8 months that consumer prices have risen in the 6% range for two consecutive months since October (7.2%) and November (6.8%) 1998. Particularly, agricultural product prices rose 8.5% last month, significantly exceeding the overall average, and processed food and dining-out prices also rose 8.2% and 8.4%, respectively, indicating that high inflation is expected to continue for some time.

More Than 10,000 Foreign Workers Enter Monthly... Quota Expansion Planned

Lee Jung-sik, Minister of Employment and Labor, recently announced plans to bring in more than 10,000 foreign workers per month to alleviate the worsening labor shortages in shipbuilding, agriculture, and other sectors. He also said institutional support such as quota expansion and simplification of entry procedures will be strengthened to normalize foreign worker entry delayed by COVID-19.

Minister Lee announced these measures in the 'Labor Shortage Resolution Support Plan' at the 4th Emergency Economic Ministers' Meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho on the morning of the 8th. In his opening remarks, Minister Lee emphasized, "The recent labor shortage is a result of a combination of temporary factors such as delayed foreign worker entry due to COVID-19 and a surge in labor demand due to recovery in face-to-face service industries, as well as structural factors such as accumulated poor working conditions."

Minister Lee said, "First, to promptly resolve urgent field difficulties, we will swiftly bring in more than 10,000 foreign workers (E-9 visa holders) per month to restore the number of foreign workers residing in Korea to pre-COVID levels within this year. We will also finalize next year's quota early in October and ensure foreign workers can enter immediately from January next year to support smooth work on site."