Heatflation Hits South Korea, Sending Food Prices Soaring
South Korea is currently grappling with a new economic challenge - "heatflation," a term coined to describe the inflationary pressures driven by an intense heatwave. This phenomenon has led to a sharp increase in prices of agricultural products, particularly affecting staples like watermelons and napa cabbages. The prices have surged to nearly 30,000 Korean Won for a single watermelon and around 4,309 Korean Won for a napa cabbage, marking a significant departure from usual market rates. The situation has been exacerbated by the slow growth of fruits and vegetables due to the high temperatures, coupled with an increased demand, putting double pressure on prices.
14 July 2025
The Bank of Korea had previously forecasted a stable inflation rate of around 2%, suggesting that this heat-induced inflation is a sudden and unexpected development. The central bank had acknowledged uncertainties stemming from US tariff policies, situations in the Middle East, and seasonal weather conditions, but the current heatwave's impact on inflation appears unprecedented.
The implications of this heatflation are widespread, affecting not only the agricultural sector but also impacting consumer wallets. The surge in prices of basic food items has sparked discussions on social media, drawing comparisons to prices in China and highlighting the vulnerabilities of economies to extreme weather conditions. South Korea's limited arable land, reliance on agricultural imports, and the Korean Won's exchange rate are cited as factors contributing to the high prices, with some suggesting that certain agricultural associations might be coordinating to keep prices high.
As the heatflation trend continues, it brings to light the direct impact of climate and weather on economic stability and the daily lives of citizens. The situation underscores the need for governments and central banks to factor in climate-related risks in their economic forecasts and policies. South Korea's experience with heatflation serves as a stark reminder of the interconnectedness of environmental and economic health, and the challenges that extreme weather events pose to inflation and food security.
