Inflation After COVID-19

Reporter Kim Han-deul

sswante88@naver.com

What has caused the recent inflation? Firstly, one of the major contributing factors has been the Russia and Ukraine war which strongly relates to the international oil price. Russia is the third largest crude oil producing country. In March, 2022, America forbode the import of Russian crude oil to its territory. Recently, the EU has committed to reducing its imports of Russian crude oil by 90 percent. In July, Saudi Arabia decided to raise the price of crude oil and this contributed to the rise in oil price. Furthermore, the biggest oil consuming market, China, has lifted the blockage, and this caused an explosion in demand. During the COVID-19 pandemic era, the Chinese authorities introduced restrictions, causing the demand for oil to reduce. China has also not imposed any sanctions against Russia and therefore imports Russian crude oil at a reasonable price.

Secondly, the war in Ukraine also had an inevitable knock-on effect on food prices due to Ukraine's crop production. The soaring price for grain and crops has caused 'Agflation', which is a compound word for agricultural and inflation. The war between Russia and Ukraine has been prolonged, and as such, depleted harvests and the restriction of exports to certain countries took place which caused cereal crop prices to soar. In the international grain market, the price of wheat rose by 60 percent and the price of corn rose by 30 percent.

Severe droughts caused by climate change have also affected inflation. The effects of climate change on precipitation have meant that vegetable crops are suffering. In 2018, due to the long intense heat, leaf vegetables and summer fruits burned, insects died and the price of food skyrocketed.

Thirdly, the rise in the amount of money on the market also has a close relation to inflation. To cope with the slowing economy during the COVID-19 era, South Korea and other national central banks printed a lot of money. Also, the national government has released a lot of money. All of this money released raises demand and contributes to inflation. Finally, the lifting of social distancing measures brought back the reviviscence of suppressed consumer sentiment affecting inflation pressure. According to KOSIS, CPI for living necessities went from 106.06 in March, 2022, to 108.62 in August, 2022.