Summary
- The Bank of Korea stated that Korea’s living costs and major item prices are significantly higher and rising faster than the OECD average.
- It was reported that nominal purchasing power growth has not kept up with price increases since 2021, resulting in real purchasing power being lower than before the pandemic.
- It was analyzed that the persistent rise in input costs for processed foods and personal services is expanding their impact on consumer prices.
Korea's Food, Clothing, and Housing Prices Significantly Higher Than OECD Average
Fruit, Vegetables, and Meat Are 1.5 Times OECD Average
An analysis has revealed that the essential living costs closely linked to the daily lives of Koreans are higher and rising faster than those in other major countries, hindering a recovery in consumption.
In a report titled ‘Recent Trends and Evaluation of Living Prices’ released on the 18th, the Bank of Korea stated that the cumulative increase in essential goods-centered living prices from 2021 to May 2025 reached 19.1%, which is 3.2 percentage points higher than the consumer price increase rate (15.9%) during the same period.
Living prices have remained high overall, first due to skyrocketing food and energy prices driven by the pandemic, international conflicts, and worsening climate, and more recently with price increases in imported raw materials and exchange rates being reflected in processed food.
In 2023, when the OECD average price is set at 100, Korea's figures for food, clothing, and housing costs were 156, 161, and 123, respectively, far exceeding the world average. According to statistics from the Economist Intelligence Unit (EIU), a UK economic analysis agency, Korea’s prices for fruit, vegetables, and meat were also more than 1.5 times the OECD average.
Such high living costs are felt more acutely by vulnerable groups, curbing consumption. In fact, with nominal purchasing power (wage income) growth failing to keep pace with price increases since 2021, the average real purchasing power growth rate from 2021 to the first quarter of 2025 was 2.2%, lower than before the pandemic (2012–2019, 3.4%).
In a Bank of Korea survey conducted from January to April this year, 62% of respondents who said they did not increase their spending cited ‘declining purchasing power due to rising prices’ as a major reason. The Bank of Korea warned, “If the perception of high living prices continues, it could influence household inflation expectations (price increases) and undermine price stability from a medium- to long-term perspective.” Proposed solutions include deregulation, promoting market competition, diversifying import sources of raw materials, and expanding quota tariffs.
A report released alongside, titled ‘Cost-side Inflation Pressure in Processed Foods and Personal Services’, showed that the contribution of processed foods and personal service items to the overall consumer price rise reached 1.4 percentage points last month. In other words, 74.9% of last month’s total consumer price increase came from processed foods and personal service items.
The Bank of Korea pointed out, “Since 2020, due to rising prices of imported raw and intermediate materials and the increase in the won/dollar exchange rate—as well as the resulting rise in domestic intermediate material prices—the cost of intermediate inputs for companies has grown considerably.” It went on to analyze, “Particularly in the case of processed foods and personal services, the prices of domestically-sourced intermediate inputs used in production continue to climb, and recently, so have the prices of key imported intermediate inputs such as agricultural, forestry, fisheries, and food products, causing a sustained upward trend in input costs.”
Hyunbo Shin, Korea Economic Daily, greaterfool@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
