Gas prices are on display at a gas station in Seoul, Monday. Yonhap
Korea is facing a growing stagflation threat, as a surge in global oil prices coupled with a weakening currency pushes inflation higher, putting this year’s economic growth outlook of 2 percent under threat, market watchers said Monday.
Stagflation is high inflation combined with slowing growth.
The risk has been intensifying as international crude prices jumped above $100 per barrel for the first time in nearly four years, driven by escalating geopolitical tensions in the Middle East.
Many warn the shock could ripple widely through Asia's fourth-largest economy, which remains highly dependent on imported energy and therefore particularly vulnerable to global commodity price swings.
“The risk of stagflation is rising,” said Lee In-ho, former professor of economics at Seoul National University. “Rising oil prices can also weigh on global trade and disrupt logistics, creating headwinds for Korea’s export-dependent economy. Rising import prices can also shave off the country’s current account surplus.”
At the same time, Lee warned that inflation driven by higher oil prices could weaken consumer sentiment. “If rising living costs dampen household spending, expectations for a recovery in domestic demand and investment may also fade, further slowing growth momentum.”
According to financial market data, April futures for West Texas Intermediate (WTI) rose to $107.54 per barrel on the New York Mercantile Exchange, Sunday (local time), the first time the benchmark has surpassed $100 since July 2022.
For Korea, the impact of higher oil prices can be swift and widespread. The country imports virtually all of its crude oil, meaning domestic prices are extremely sensitive to global energy markets.
Increases in oil prices typically translate quickly into higher fuel and transportation costs, later spreading to broader consumer prices through manufacturing and logistics expenses.
Source: Korea Times News
