Cost-of-living measures proposed, one that could cut pork prices

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Cost-of-living measures proposed, one that could cut pork prices

Published: 30 May. 2022, 16:10 Updated: 30 May. 2022, 19:24

Finance Minister Choo Kyoung-ho at a government meeting on 10 initiatives that may lower costs held in Seoul on Monday. [YONHAP]

Like many governments globally, Korea's is trying to spend its way out of inflation, rolling out a raft of tax and tariff cuts and other support measures just a day after a record extra budget was passed.

On Monday, 10 cost-of-living initiatives were proposed, most of which can be implemented by executive order and most set for implementation by July 1. They range from adjustments to duties to cash for families.

The 10 measures are focused on "food, living expenses and housing — which are closely related to people's lives," said Finance Minister Choo Kyoung-ho. "We are focused on that which can immediately be implemented."

Tax rates can be adjusted temporarily without a National Assembly vote, while other measures are under the purview of the executive.

Imported pork will be exempt from duties through the end of 2022, which could lower prices by 20 percent, and imported coffee beans will be exempt from the value-added tax through 2023.

Government assessments on single-family homes will be taken back to 2021 levels. The 17.2 percent average rise in 2022 will not be implemented.

For the comprehensive real estate holding tax, which is levied on high-priced properties, the calculation will be adjusted so that rates go back to 2020 levels.

The loan-to-value ratio for mortgages will be increased for first-time home buyers, to 80 percent from the current 50-to-70 percent range, effective in the third quarter. Loan guarantees for 50-years mortgages for first-time homeowners and newlyweds are also being considered, allowing banks to issue five-decade housing loans.

"First and foremost, we will lower costs as much as we can on imported goods, including pork, cooking oil and coffee beans, whose import prices are under upward pressure," Choo said.

The measures will cost the country 3.1 trillion won.

The 10 percent value-added tax will be waived for kimchi, doenjang, gochujang, soy sauce and tofu. Processed kimchi prices in April rose 10.6 percent on year, while doenjang prices were up 16.3 percent.

The 30-percent cut in the consumption tax for new car purchases will be extended, while the government will be offering grants of up to 1 million won to 2.3 million low-income households and energy vouchers.

The Bank of Korea last week raised the base rate to 1.75 percent, the highest since November 2018.

This it is the third rate rise this year, and the first time in 15 years that rates have been increased at two consecutive meetings.

In April, consumer prices rose 4.8 percent on year, the sharpest increase in nearly 14 years, and the central bank is forecasting 4.5 percent inflation for 2022.

It would be the highest inflation since the 4.7 percent in 2008.

The central bank is forecasting 2.7 percent growth this year.

The 10 initiatives that the government announced came a day after the National Assembly approved a 62 trillion-won supplementary budget, the largest ever.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]