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| A pedestrian walks by the Seoul head office of state-run Korea Electric Power Corp. (KEPCO), Friday, which posted a record operating loss of 32.6 trillion won ($25.02 billion) in 2022. Yonhap |
By Yi Whan-woo
Snowballing debts at state-run energy companies are raising doubts over the government's forecast that inflation will continue to cool off and the country's economy will rebound in the second half of this year.
Among the companies that announced 2022 earnings data last week, Korea Electric Power Corp. (KEPCO) said it posted a record operating loss of 32.6 trillion won ($25.02 billion) last year.
The operating loss at KEPCO, the country's sole power distributor, more than quintupled year-on-year, which adds to its debt-to-equity ratio that was estimated to have surpassed 400 percent as of 2022.
KOGAS, which is responsible for Korea's nationwide gas distribution network, said its operating profit surged 56.2 percent year-on-year to 103.8 trillion won. But its accounts receivable, the amount of money that customers owe a company for products or services, prompted its debt-to-equity ratio to rise 190 percentage points year-on-year to 643 percent.
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He noted that the government may be tempted to hike electricity and gas prices to cap such debts, which would spell a failure in its plan to ease inflation.
The government forecast inflation, although it remains in the 5-percent range, will be eased to the 4-percent range in the first half and lowered to its target goal of mid-3 percent by the year-end.
Accordingly, the government expects the economy to remain sluggish in the first half of the year, but bounce back in the second half to reach its target growth in the mid-1-percent range.
"Cooling inflation is a premise for the government's path for economic recovery, but possible hikes in utility costs can pull up the cost of goods and services and thus disrupt an economic recovery," the professor said.
Lee Sang-ho, head of the Korea Economic Research Institute's (KERI) economic policy team, voiced a similar view, pointing out that electricity prices were hiked by 9.5 percent ― the highest in nearly four decades ― in the first quarter of this year.
The gas price is also set to increase by 1.11 won per megajoule, also starting in July.
Chon So-ra, a research fellow at Korea Development Institute (KDI), a state-run think tank, said small, incremental increases in utility costs are necessary after they were frozen under the previous administration in the name of lessening the financial burden on the public.
"But even so, price hikes of utility services can weaken private spending that has been a main driver of growth along with exports," Chon said. "The government is therefore urged to balance growth and inflation by closely working with relevant authorities."
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