South Korea’s economy faces a growing list of challenges, such as soaring inflation, higher interest rates and a weakening currency. It is an encouraging sign that President Yoon Suk-yeol is now taking the situation seriously. However, there are some doubts as to whether he will produce effective policies to tame inflation. Yoon said Tuesday that he will go out and listen to the challenges people are facing and preside over an emergency economic and public livelihood meeting each week. Yoon’s plan was announced shortly after the country’s consumer prices soared 6 percent in June from a year earlier, marking the fastest increase in nearly 24 years, largely due to soaring energy prices. It rose 5.4 percent on-year in May.

The data marks the highest inflation rate since November 1998, when the country was struggling to cope with the 1997-1998 Asian financial crisis. The record numbers were expected as inflationary pressure rapidly climbs amid rises in crude oil and other commodity prices due to the war in Ukraine and continued disruptions of global supply chains. The 6 percent inflation figure for June, however, does not show the full picture. Korean consumers are surprised that prices for many everyday items are going up so fast. Data from Statistics Korea shows that the price index for everyday items jumped 7.4 percent on-year last month, and eating-out costs soared 8 percent from the year-earlier period, the highest rise in 30 years.

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What lies ahead is more problematic. As the government reluctantly allows energy rate hikes to take effect from this month, some experts forecast consumer price rises to top 7 percent ~ a much-dreaded number that could hurt many. To grapple with mounting inflation pressure, the Bank of Korea will likely raise the benchmark rate when it holds a rate-setting meeting on July 13. Given that the central bank has already hiked interest rates five times since August last year, it is not clear whether it will go for what is called a “big-step” rate increase of 50 basis points, but what’s clear is that it will be pushed to raise the rate in the coming months if the current trend continues. South Korea cannot completely shield itself from global economic developments.

The US Federal Reserve recently took a “giant-step” rate hike of 75 basis points, and central banks in other parts of the world have similarly raised rates to tame inflation. Along with a higher interest rate of its own, one factor that could spur an outflow of foreign capital, another worry, is the weakening of the local currency. The Korean won hit a 13- year low against the US dollar amid fears of a global recession during its Wednesday session. Market watchers predict a stronger dollar will stay for a while. In a related development, the country’s foreign reserves fell to $438.28 billion as of end-June, down $9.43 billion from a month earlier, as authorities unloaded the dollar to help stem the won from falling sharply.

The latest decline in foreign reserves marks the biggest since November 2008. Worries about a global recession are pushing down oil prices, but its positive effect on inflation could be offset by the weakening of the Korean currency since oil imports are based on the dollar. Against this bleak backdrop, public expectations are high that Yoon’s heightened awareness of an economic crisis, coupled with his willingness to listen to people, will lead to better countermeasures.