[2024 Economic Policy] Bananas and Mangoes Become Cheaper... Public Utility Rates Frozen in the First Half

The government plans to make an all-out effort to achieve inflation in the 2% range early this year, as stated in this year's economic policy direction. To this end, it will apply tariff quotas on 21 types of fruits and processed fruit products and import 60,000 tons of vegetables and chicken. Public utility fees at both central and local levels will be frozen in the first half of the year, and efforts will be made to reduce the electricity and interest burdens on small business owners. Jobs for the elderly will be expanded to over 1 million, and allowances will be raised for the first time in six years.

In the '2024 Economic Policy Direction' jointly announced by ministries on the 4th, the government decided to exempt or reduce tariffs on 21 types of fruits through emergency tariff quotas within this month and import 300,000 tons of fruits and processed fruit products in the first half of the year. The total tariff support amount is 135.1 billion KRW, marking the largest scale of tariff exemption and reduction for 21 types of fruits ever.

Attention is focused on whether this tariff quota will partially alleviate the fruit price issue that has driven up consumer prices so far. According to the December consumer price trend by Statistics Korea, the fresh food index rose 14.5% year-on-year, significantly contributing to consumer prices maintaining the 3% range for five consecutive months. In particular, fresh fruits such as apples, tomatoes, and strawberries rose by as much as 26.1% year-on-year.

With the application of this tariff quota, the tariff rates on bananas, pineapples, mangoes, grapefruits, and avocados (all 30%) will be reduced to 0%, and oranges (50%) will be changed to 10%. The tariff on frozen strawberries (30%) will also be reduced to 0%, apple juice (45~50%) will be lowered to 5~10%, and tomato paste (5%) will be reduced to 0%. The quantity of fruits subject to the tariff quota reaches 300,000 tons. The tariff rates on fresh green onions and eggs (27%) will also be reduced to 0%, and through regular tariff quotas, tariffs on chicken (20~30%) and processed egg products (8~30%) will also be adjusted to 0%.

To reduce the public utility fee burden on low-income households, central and local public utility fees will be operated with a freeze policy in the first half of the year, and the import system will be improved by imposing stockpiling and import obligations on LNG direct importers to ensure stable supply of liquefied natural gas (LNG). The interest rate on student loans for the first semester will be frozen at 1.7%, and the living expense loan limit within student loans will be expanded to 4 million KRW per year.

To protect multi-family and multi-unit housing from reverse lease difficulties, LH will purchase more than 10,000 multi-family and multi-unit houses it has built, and public rental housing will be expanded to 115,000 units, an increase from last year. Through 35 trillion KRW of Didimdol loans, including special newborn loans, housing purchase funds will be supported for low-income and childbirth households. For households without homes with newborns born after January 1 this year, low-interest special newborn jeonse loans (Butimok loans) will be supported up to a limit of 300 million KRW.

To ease the electricity cost burden on small business owners, 1.26 million small business owners with annual sales of 30 million KRW or less will receive a 200,000 KRW discount each, totaling 252 billion KRW in electricity fee reductions, and through financial sector 'win-win finance,' interest payments will be refunded up to 3 million KRW. Low-interest refinancing loans of 9 trillion KRW will reduce interest burdens above 7% to below 5.5%. The income deduction rate for traditional markets will be raised from 40% to 80%, and public and private sectors will be encouraged to conduct early purchase and prepayment campaigns in the first half of the year. Onnuri gift certificates will also be issued at 5 trillion KRW, an increase of 1 trillion KRW compared to the previous year.

Support for the elderly and vulnerable groups will also be strengthened. The elderly job program will be expanded from 880,000 to 1.03 million, and elderly job allowances will be increased by 7% for the first time in six years. The government plans to start early implementation aiming to hire 90% of direct job support personnel for the elderly and vulnerable groups in the first quarter. Livelihood benefits for low-income households will also increase by 13.2% for a family of four, with 45,000 new households supported.

Since the livelihood support measures are concentrated in the first half of the year, there are criticisms that this is populism aimed at the general election in April this year. Regarding the criticism that the freeze on public utility fees in the first half of the year was election-conscious, Kim Byung-hwan, the 1st Vice Minister of the Ministry of Economy and Finance, explained, "In order for the inflation stabilization trend to settle in the 2% range, the public sector needs to tighten its belt a little more until the first half of the year as a policy stance," adding, "This is unrelated to the general election."