Korea's food, clothing and shelter are 55% higher than the OECD average

A survey revealed that the cost of living in South Korea is 5% higher than the OECD average. The high prices of agricultural produce, especially apples, are said to be due to structural factors such as restrictions on imports.
The Bank of Korea (BOK) has concluded that the risk of structural inflation cannot be resolved by base interest rates alone, and is of the opinion that imports of agricultural products must be strengthened.
The Bank of Korea held a meeting to review the price stability target situation in June on the 18th and released a report titled “Characteristics and Implications of Korea’s Price Level: Focusing on Comparison with Major Countries,” which included the above information.
According to the report, the cost of food, clothing and shelter in Korea, including clothing, shoes, food and rent, was 55% higher than the OECD average last year. Apples were 279% more expensive,
Pork and potatoes were over 200% more expensive. T-shirts and men's suits were also about 210% more expensive. The Bank of Korea said, "Even when income levels are taken into account, food and clothing prices are 1.5 times higher than the OECD average."
In the case of housing rent (based on Seoul rent), the Profit-to-Income Ratio (PIR) was 25.8, ranking 22nd out of 267 countries. Meanwhile, public utility charges were 20.4 times higher than the government's electricity and gas charges.
Thanks to the policy of restraining price increases, food prices were 27% lower. Even up until the 1990s, food prices were about 19% higher than the OECD average, but last year they were 56% higher.
In the past, the price was 9% lower, but last year it was 61% higher. When analyzing the reasons why the prices of the relevant items have risen over time, it was found that in the case of agricultural products, the reasons were a lack of arable land and low productivity due to small-scale farming.
This was the main reason. In this situation, the import of agricultural products has decreased. The ratio of fruits and vegetables imported to Korea is 40% and 30%, respectively, which is lower than the United States' 70% and 50%. For example,
In Korea, there are five varieties of apples, 70% of which are Fuji apples. In contrast, there are 22 varieties in the United States and 15 varieties in the Eurozone.
The inflation rate was higher than the OECD average due to distribution costs. The explanation is that structural factors by item led to a higher inflation rate than other countries, ultimately raising the price level.
The Bank of Japan aims to achieve "price stability" by reaching a target value (2%) in the medium term, but explained that such structural issues cannot be resolved by the base interest rate alone.
Bank of Korea Governor Lee Chang-yong said, "We must resolve structural issues through monetary policy.
"We want to convey the message that we need to clarify the structural factors behind prices and have government ministries and agencies work to resolve these structural issues in the medium to long term," he said.
The Ministry of Agriculture, Food and Rural Affairs is not proactive in importing agricultural products such as apples in order to protect farmers, but it is necessary to let people know who will lose and who will benefit from these policies, said Lee.
"The Bank of Korea targets the inflation rate and is not looking at the price level," said Kim Eun, vice governor of the Bank of Korea. "When a structural supply shock occurs, the second-order effect (the increase in wages) is likely to occur.
"If there is no inflation spread to other sectors, there is no need for the central bank to respond to inflation with monetary policy," he said. However, if excessive agricultural products are imported, it could weaken Korea's production base.
However, he said that it is necessary to adjust the speed of imports because it could lead to higher prices for agricultural products.
"It's a good policy in terms of protecting farmers, but it can lead to large price fluctuations, so we need to promote import diversification," he said. "The question is how fast we should import.
Regarding this, the relevant ministries and agencies in charge of pests and disease and farmer protection should make the decision."