Sharp Increase on Property Price and Oil Price . Too Much Money in Domestic Economy

Bank of Korea (BOK) and Korea Development Institute (KDI) have been concerned about a price unrest.

Experts expected that there an economy would be getting brisk between consumers for the first half of the year, but this optimistic view has appeared recently.

Park Seung, the Governor of Bank of Korea said at a radio interview on September 12, “Companies have earned the maximum profits and had them all in cash. If companies get started a facility investment, the price unrest will be significantly concerned next year because it is connected with the price increase”. He added “There are a lot of money, uncertain international oil price and problems on properties in market. We will increase an interest rate and gather money if the price is worried. “

In the report of ‘Economic Trend of August’, KDI analyzed that there are potential price unrest causes such as the increased property price and high salary rate.

KDI said “The housing purchase price continues to increase focused on apartments in July and August. The nominal wages between January and May increased by 9.6% and the wage increase rate is higher than 6.5% of the same period of last year.”

Besides, according to ‘Consumer survey of August’ published by Korea National Statistical Office, there is 106.2 for CSI which expresses an expectation on economic situation after 6 months.

Started to 100.9 in January, CSI increased to 110.6 in June, but decreased to 107.8 in July. Also, it continued to decrease in August.

Sang-Chul Kim Kwang-Hyun Kim sckim007@donga.com kkh@donga.com