EDITORIAL from Korea Herald on April 27

More risks for economy
High inflation, depreciation of Korean won call for prudence from BOK policymakers

Russia's invasion of Ukraine, which exacerbates already troubled global supply chains, is not the only headache for the Korean economy to tackle. There is a growing list of risk factors, some of which warrant a careful analysis and, if necessary, decisive action.

As with other parts of the world including the United States and Europe, inflation is posing the most immediate and insidious threat. As if the war in Ukraine isn't bad enough,Indonesia's surprise palm oil export ban is forcing Korea's small restaurant and food delivery operators to find alternatives, or swallow sharply decreased profits -- or even losses.

Prices are racing to go up for other items, ranging from energy prices to consumer goods based largely on imports. Korea's consumer prices grew 4.1 percent in March from a year ago, the fastest on-year gain in more than 10 years due to higher commodity prices.

Fast-rising consumer prices, spurred by higher prices of raw materials and shortage of components imported from other countries, are eroding consumers' purchasing power, which in turn could dampen domestic consumption and cloud the growth outlook going forward.

No wonder, then, that Gov. Rhee Chang-yong, the new Bank of Korea chief, said Monday that he is more concerned about inflation than economic growth. Rhee's stance at his first press briefing since he took office marks a change in tone from his earlier focus on growth over inflation.

Rhee's remark came after the International Monetary Fund raised its inflation projection for Korea to 4 percent from 3.1 percent, and lowered its 2022 growth outlook to 2.5 percent from an earlier projection of 3 percent.

The central bank also projected that high inflation at this pace would push up wages for Korean workers, adding to more upward pressure on prices in a vicious cycle.

However, Rhee did not send a clear sign for a further interest rate hike in May, saying that the BOK will closely watch the US Federal Reserve's forthcoming rate decision. Fed Chair Jerome Powell said on Thursday that a rate hike of half a percentage point "will be on the table for the May meeting," suggesting that he is keen to rein in high inflation at a faster clip and cool down the overheating US economy.

But it is unlikely that the BOK will take its cue from the Fed by raising the benchmark rate dramatically in the coming months. The central bank already hiked its policy rate by a quarter percentage point in mid-April. It was the fourth rate increase since August last year.

Rhee said the central bank will monitor the financial market to see whether the Fed's brisk rate hikes, including an imminent "big step," could touch off capital outflow coupled with the weakening Korean won against the US dollar. He downplayed the risk of a weaker local currency, arguing the won's depreciation has not been as serious as that of the euro and other currencies.

But it remains to be seen whether the Korean won will sustain its value even if foreign investors dump Korean stocks and head for the US to seek higher interest income. The Korean won has depreciated 12.7 percent against the dollar from a year earlier.

In all fairness, Korea is in a relatively better position than Japan in terms of the exchange rate, given that the Japanese yen has dropped to a 20-year low against the dollar.

But there is no room for complacency, as the continued weakening of the Korean won will push up prices. Growth data is not pretty, either. The country's gross domestic product grew 0.7 percent in the first quarter this year, decelerating from a 1.2 percent increase in the fourth quarter of 2021, the data from the BOK showed Tuesday. The country is urged to take proactive measures including the currency swap deal with the US without delay.
(END)

Indonesia's threat to ban oil palm exports worries consumers across Africa — could Nigeria and other African exporters save the day?

>Indonesia recently shocked the world when it unexpectedly announced it was planning to ban oil palm exports.


Indonesia threatens to ban oil palm exports
Speaking during a telecast, Indonesia's President Joko Widodo vowed to "monitor and evaluate the implementation of this policy so availability of cooking oil in the domestic market becomes abundant and affordable".

Reuters reported that the move had inevitably sent oil palm prices soaring across the world.

Over here in Africa,consumers are still very worried that such a move could greatly exacerbate food prices, as well as prices of other household essentials such as soaps.


Here's what you should know

Indonesia is one of the world's largest oil palm producers and exporters. The country, alongside Malaysia, account for as much as 85% of the commodity's global output, according to statistics obtained from The European Palm Oil Alliance. This explains why the country's threat had elicited unprecedented shock among oil palm exporters and consumers around the world.

The shockwave was particularly felt across Sub-Saharan Africa where quite a number of countries depend solely on imports to meet their oil palm needs. A good example of such a country is Kenya, where cooking oil prices have already soared by 30% since late 2021.

Following Indonesia's threat to ban oil palm exports, Kenyan manufacturers expressed worry that the move could lead to a shortage of the essential raw material, according to Business Daily.

As you may well know, oil palm is essentially used for cooking. But besides being refined into cooking oil, it is also used by soap and cosmetics manufacturers as a major raw material. Therefore, an export ban by a major exporter like Indonesia would not only result in a global shortage, it could also send prices soaring.

While an alternative would be for consumers to look elsewhere to meet their demands, the worry remains whether said alternative sources would be capable of meeting the huge demand for oil palm here in Africa.

Countries such as Nigeria, Angola, Algeria, Libya and Egypt are among Africa's top producers of oil palm, according to Statista. Unfortunately, their collective annual output is hardly sufficient enough to meet local demands.


What happens now?

Luckily, Indonesia has since back-tracked on its earlier decision to completely ban exports. Business Insider Africa understands that the Southeast Asian country does not have enough storage infrastructure to manage the glut that would follow a total ban of oil palm.

Earlier this week, Indonesian officials informed oil palm marketers that the ban will now be on exports of refined oil palm products. In other words, crude oil palm and other derivative products could still be exported.

The latest update has considerably helped to relieve the panic experienced by global oil pam consumers over the past week. That notwithstanding, the development underscores the fact that Africa's oil palm producers need to double down their efforts so as to minimize the continent's dependence on imports.

https://www.pulse.ng/business/intern...xports/h9594v0

Indonesia starts palm oil export ban

Indonesia enforced a ban on exports of palm oil on Thursday to secure domestic supplies amid rising demand for the product in other parts of the world.

Indonesia is the world's biggest palm oil producer, accounting for nearly 60 percent of output. Retail prices of some types of cooking oil have risen by 70 percent from a year earlier, prompting demonstrations against the hikes.

There are concerns that the supply of sunflower oil, which is mainly produced in Ukraine and Russia, may be disrupted amid Russia's invasion. That is causing higher demand for palm oil as an alternative.

The Indonesian government says it will continue the ban until the average price of cooking oil falls to 14,000 rupiah per liter -- about a dollar -- from the current level of around 17,000 rupiah.

If the ban is prolonged, it could lead to a rise in prices of a wide range of goods because palm oil is used in many products, such as food and cosmetics.

Ueno Wataru at the Jakarta office of the Japan External Trade Organization said Japan imported 630,000 tons of palm oil last year, and 220,000 tons of it came from Indonesia. He said the prices of other cooking oils, such as soybean oil, could also soar.
https://www3.nhk.or.jp/nhkworld/en/n...s/20220428_07/