2015 was Korea’s flat-lined year

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2015 was Korea’s flat-lined year

2015 was a year of marginal increases across the economy.

Korea’s consumer prices rose 0.7 percent in 2015, the lowest rate since 1998 when Korea was bulldozed by the Asian financial crisis, a report by Statistics Korea said on Thursday.

The country’s inflation index has gradually fallen since 2011 from 4.0 percent to 1.3 percent as of 2014.

Although the index climbed 1.3 percent in December, the monthly high for last year, the annual average for the entire year remained almost flat.

Despite a 2,000 won ($1.7) increase in cigarette prices in 2015, consumer prices showed a slow growth.

According to the Ministry of Strategy and Finance, if not for the cigarette price increase, the annual inflation index would have risen only 0.13 percent from last year.

One of primary reasons for such low inflation was oil prices.

In the third quarter of 2014, international oil prices were above $100 per barrel. Now they hover around $30.

“Such low inflation could remain for a while,” said Woo Young-je, director of prices trend at Statistics Korea, “as oil prices are forecast to decline further below $30.”

In December, consumer prices showed the sharpest growth since August 2014, of 1.3 percent. The increase was attributable to price spikes in vegetables and fruits. Onion prices soared 128.8 percent on-year.

A sub-index reflecting housing prices showed a 0.9 percent rise on-year, as long-term lease prices, known as jeonse prices, jumped 4.1 percent.

Bank of Korea Governor Lee Ju-yeol said in his New Year’s address that the central bank will make efforts to reach a 2.0 inflation target to avoid letting the economy slip into deflation.

“[The central bank] will make its best efforts to help consumer price growth reach 2 percent in the mid-term,” Lee said in an address released on Thursday. “The bank reset its goal for price stabilization considering an adequate inflation level for our economy. The inflation target will help stabilize expected inflation rates of market players and help the central bank operate monetary policy more flexibly.”

The bank will provide explanations when the inflation index deviates from the target, he said.

The country’s primary stock exchange index rallied 2.4 percent from a year earlier when it closed at 1,961.31 on Wednesday. The stock index emerged from a 4.8 percent slide in 2014. However, it failed to escape a pattern of minor rises and falls throughout the year. On Jan. 1, 2015, the Kospi opened at 1,914.31.

In terms of growth percentage, Korea ranked eighth among G-20 nations, Korea Exchange said.

The Argentine stock market showed the steepest growth of 36.4 percent in 2015.

Among the 20 nations, only 10 countries saw their stock markets grow last year.

“The Kospi had ups in the first six months of 2015 as it reached the 2,100 mark in April, but plunged to the 1,800 range in August,” Korea Exchange said in a report. “In the latter part of the year, the Kospi was burdened with the global slowdown, low oil prices, the weakened Chinese economy and woes regarding the U.S. interest rate hike.”

However, the main bourse of Seoul expanded its size with market capitalization reaching 1,243 trillion won, up 51 trillion won or 4.3 percent from 2013. It became the world’s 11th largest stock exchange market, according to data compiled by Bloomberg.

There were notable changes in the top 10 on the Kospi in 2015. IT company Naver, steelmaker Posco and IT service and solution provider Samsung SDS dropped off the list, while Samsung’s de facto holding company Samsung C&T, cosmetics leader AmorePacific and electric-vehicle battery maker LG Chem entered.

The property market enjoyed a boost owing to loosened loan-to-value and debt-to-income regulations in 2015. The total market cap of apartments in Korea surpassed 2,000 trillion won for the first time.

According to Real Estate 114, a property market information provider, the total market cap of apartments across the nation was 2,126.9 trillion won as of late December, up 166 trillion won from a year earlier, or 8.5 percent.

The aggregate number of housing transactions was 1.1 million as of November, up 21 percent from a year earlier, according to data by the Ministry of Land, Infrastructure and Transport. That figure is the largest ever. The previous record was 1.08 million in 2006.

“Thanks to growth in transactions and approval of new construction, apartment prices appreciated, leading the market cap to hit a new record,” said Kim Eun-jin, head of market research at the agency.

“While the possibility of the Korean economy entering a long-term low growth phase is around the corner, because of changes like an aging society, the Korean economy could fall to mid-1-percent growth after five years,” said Lee Geun-tae, LG Economic Research Institute senior researcher.

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]

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