SEOUL, June 25 (Yonhap) — South Korea’s inflation will likely rise at a lower rate even if the new coronavirus pandemic ends, due to a slowdown in economic growth and changes in how people spend or save their money, the head of South Korea’s central bank said Thursday.

The country’s consumer prices increased in the mid-1 percent range in January but slowed to around 0 percent after the country reported its first confirmed case of the new coronavirus on Jan. 20, dipping to a negative 0.3 percent on-year growth in May.

“The reason for such a drop in inflation is because the spread of the new coronavirus caused unprecedented shock for the entire global economy, working as a significant downward pressure on prices,” Bank of Korea (BOK) Gov. Lee Ju-yeol told a press conference.’

Keeping consumer prices growing at a target level is one of the top priorities for a central bank. The BOK’s inflation target currently sits at 2 percent.

The central bank has already forecast that consumer prices are expected to fall short of the target level this year, growing 0.3 percent from a year earlier.

The country’s consumer prices increased 0.4 percent on-year in 2019, then marking the slowest growth ever since the country began compiling such data in 1954.

They are expected to rise 1.1 percent on-year in 2021, according to BOK estimates published late last month.

Lee insisted the BOK was doing all it can to keep prices growing, noting it has slashed its policy rate to a record low of 0.5 percent while also injecting massive liquidity into the market as part of efforts to support local businesses and households hit by COVID-19.

He blamed reduced spending and investment for the slower growth in inflation.

“Most of all, global oil prices dropped sharply due to a reduction in demand caused by reduced economic activities, while on the demand side, the upward pressure on prices, especially from the tourism, accommodation and restaurant businesses, also weakened due to the social distancing campaign,” the BOK chief said.

“Economic activities have recently resumed in major economies, but the recoveries of the local and global economies, as well as global oil prices, are expected to be gradual since concerns of a second wave of the new coronavirus still remain high,” he added.

Lee insisted the rate of recovery will continue to remain subdued even if the COVID-19 pandemic fades away due to what he called pandemic-caused fundamental changes.

“Based on our historical experience, households and businesses tend to reduce their debt and increase their savings after experiencing a major pandemic or an economic crisis because of increased uncertainties,” he said.

“Also, in case they experience mass layoffs or sharp declines in sales, the so-called super-savers with extreme risk-averse attitudes may increase,” the top central banker added, also noting an increase of such savers may further slow down the economic recovery and rise in inflation by reducing consumption and investment.

“Considering such factors, consumer prices may be expected to continue their low increase for a significant period of time even after the COVID-19 pandemic is eased,” Lee said.

He added that the BOK will continue to maintain its easing stance to support the economy and inflation while also working to develop ways to improve the effectiveness of its monetary policy.