During the global economic slowdown brought on by the spread of COVID-19, a majority of the world’s central banks have adopted accommodative monetary policies. Generally low interest rates have led to an overall increase in the price of goods and services, including the costs of construction. Recently, in order to stabilize the effects of inflation, central banks have initiated tapering and tightening policies. In May of 2022, the Federal Reserve announced a further rate hike of 50 bps to a range of 0.75% to 1.00%, and similar hikes are expected in the near future for other developed economies.

The Bank of Korea (BoK) hiked its key interest rate to 1.50%, up 25 basis points to respond to the sudden shift in inflation. With more Federal Bank rate hikes on the horizon, the exchange rate of the Korean Won and U.S. Dollar is projected to reach 1,300 KRW per USD, impacting imports of raw materials used in the construction sector. The weakening Korean won will likely accelerate the rise in import prices as well as the outflow of foreign capital. After the Russian invasion of Ukraine, energy prices have continued to skyrocket owing to the status of Russia as a major exporter of key raw materials including oil and gas. These procurement-related challenges caused overall construction costs to surge.