South Korea’s economic uncertainty fell to its lowest level in nearly two years in July, with easing oil prices, a stronger won, cooling inflation and a semiconductor-led export boom giving businesses and consumers a clearer view of the economy.
The Economic Policy Uncertainty Index, or EPU, fell 15.6% to 95.98 in July from 113.78 in June, according to data released August 11 by the Korea Development Institute. It was the lowest reading since September 2024 and the first time the index had fallen below its long-term average of 100 since October 2024.
The decline marks a sharp turnaround from earlier this year. The EPU rose from 158.14 in January to 171.38 in February before surging to 226.38 in March and 227.48 in April as war broke out in the Middle East. It then declined for three straight months, falling to 132.31 in May, 113.78 in June and 95.98 in July.
July’s reading was 57.8% below the April peak.
The EPU measures how frequently economic, policy and uncertainty-related terms appear together in news reports. A higher reading indicates that households and businesses have greater difficulty predicting economic conditions and government policy.
The KDI recalibrates the index as new monthly data are added so that the average for the full historical period remains at 100. That means earlier readings and rankings can be revised slightly over time.
Lower energy prices were a major factor behind the decline in uncertainty.
The monthly average price of Dubai crude, a key benchmark for the Middle Eastern oil that supplies much of South Korea’s imports, fell to $76.75 a barrel in July from $128.52 in March, shortly after the Middle East conflict began. That was a 40.3% decline, or $51.77 a barrel.
Lower crude prices, combined with government measures to contain inflation, helped slow the rise in domestic fuel prices.
Petroleum-product prices were 15.5% higher in July than a year earlier, down from a 24.7% increase in June. On a monthly basis, diesel prices fell 6.7%, gasoline prices dropped 6.2% and kerosene prices declined 2.1%.
Fuel prices nevertheless remained well above year-earlier levels. Diesel was up 21.5%, kerosene 20.5% and gasoline 12.6%.
Overall consumer prices rose 2.8% in July from a year earlier, bringing inflation back below 3% for the first time in three months.
