The Consumer Price Index (CPI), which measures the change in prices paid by consumers for goods and services, increased devastatingly in South Korea and other countries, especially the Organisation for Economic Co-operation and Development (OECD) member countries, due to COVID-19 and Russia’s invasion of Ukraine.
Inflation in OECD member countries hits 7.2 %, the highest rate in 31 years, in January 2022. The food prices rose 5.9% due to a growing population buying food and less resources: The price of flour increased 43% last month, while many fish prices, such as salmon, rose 100% or even more. The rise in consumer prices is unwelcomed by many people as they have to spend a lot of money for goods and services they want.
The consumer price inflation rate in South Korea jumped 3.6% as a result of stern Covid-19 policies which affected the whole market. Although this rate is considered low compared to other OECD member countries, it is the highest since 2011.
Of all goods and services, costs of transportation increased the most by reaching 6.3%
Another main cause for South Korea’s inflation is Russia’s invasion of Ukraine. Flour and fish used to be transported to South Korea via ships, which must either go round Russia or pass the Russian border. However, since most companies do not want to risk shipping near Russia these days, grocery prices have increased.
Inflation rate in the United States leaped to 7.5%.
Unlike the majority of OECD member countries, which have a robust relationship with the United States, Russia’s relations with the US are very challenging.
For this reason, as the Russia-Ukraine crisis deepened, the US announced new trade restrictions against Russia and also, much of the oil production around Russia and Ukraine was halted: now the US has to import gasoline from elsewhere.
Furthermore, the shutdown of many factories caused transportation prices to surge.
Many European countries are also suffering from high levels of inflation.
The CPI rate in Germany rose to 4.9% but as covid cases in Germany are getting worse, there is a possibility that their inflation rate might skyrocket.
The rate in the United Kingdom is the same as Germany.
However, many people predict that the inflation rate is going to fall and the economy will return to normal because the British prime minister, Borris Johnson, announced that England will initiate living with COVID. In Turkey, consumer prices surged to 48.7% due to increased prices for gas, electricity, and toll as well as doubled minimum wage.
Many economic experts forecast that the CPI rate will remain high in many countries until the COVID-19 pandemic ends.
Although a number of factories that reopened are not as many as pre-COVID-19 period, this change would result in lower inflation rate.
Moreover, Russia's invasion of Ukraine will have a dire effect on the European and American markets because many countries will halt exports and ban imports from Russia.
Justin Yonghoo Cho
Grade 9
Korea International School Pangyo