The South Korean government and the ruling party are to push for tax reforms in a bid to stave off economic stagnation from hyperinflation.

Leaders of the ruling People Power Party and Deputy Prime Minister Choo Kyung-ho said in a meeting held Monday that the two sides reached a consensus that tax relief on earnings and properties is a viable means of revitalizing the economy and stabilizing people’s livelihoods.

The meeting was joined by other key figures within the ruling bloc and key officials from the Ministry of Economy and Finance.

Rep. Sung Il-jong, head of policy at the People Power Party, told reporters after the meeting that Choo and the party leaders agreed to focus on lessening the income tax burden and lowering taxes imposed on real estate properties and transactions.

Sung said his party “strongly demanded the government proactively review relieving the tax burden on the working and middle classes,” adding that lowering the income tax would be the most helpful measure for South Koreans hit by faster-than-expected inflation.

According to Statistics Korea, the country’s consumer prices rose 6 percent last month from a year earlier. The figure is the sharpest inflation recorded since November 1998, during the Asian financial crisis.

The statistics agency forecast inflation to stay in the 6 percent range for some months and possibly rise above 7 percent. It added that annual inflation could exceed the Finance Ministry’s 4.7 percent forecast if the current trend continues.

Sung said the party also called for the government to lower corporate and inheritance taxes for small businesses, in a move aimed at triggering firms to increase investments and create more jobs.

Lowering the corporate tax was one of the key campaign promises of President Yoon Suk-yeol. The Finance Ministry last week announced its plan to cut the maximum corporate tax rate from the current 25 percent to 22 percent, on top of providing additional regulatory reliefs.

Choo added his voice to the calls last week, commenting that the country’s maximum corporate tax rate is high compared to the average rate of 21.2 percent for other member states of the Organization for Economic Cooperation and Development’s Development Assistance Committee.

Sung said negotiators also discussed adjusting categories for corporate tax rates, but it is believed final measures are likely to be smaller, as corporate tax accounts for 25 percent of the government’s tax revenue. The country’s corporate tax revenue is projected to come to 104 trillion won ($79 billion) this year.

Negotiators were on the same page regarding returning the real estate tax system to where it was before the Moon Jae-in administration. Yoon had repeatedly vowed during his presidential campaign to essentially remove all real estate regulations implemented by the Moon government.

Sung said the Monday discussion entailed easing the taxation level for single-home owners, so their tax rate is at the level it was before housing prices skyrocketed in 2020.

Choo and the People Power Party discussed providing tax relief for meal transactions of regular wage earners as a means to boost consumption, Sung said, adding that members were contemplating the reduction of taxation on pension funds.

The Monday discussion took place as the Yoon administration considers announcing extensive economic policy adjustments in the face of mounting pressure on the country’s economy, feeding fears of an impending recession and an extended period of economic letdown.

Almost every economic indicator has pointed to South Korea facing risks of stagflation, a mix of slowing economic growth and high inflation, as is the case for most economies facing fast inflation and major economic troubles stemming from Russia’s invasion of Ukraine and coronavirus concerns or fallout.

The country held a trade deficit of $10.3 billion in the first half of this year, the highest figure in 25 years. Some agencies cut their growth projection for Korea to forecast the country and other major economies entering a recession in the next 12 months.

Statistics Korea data showed the number of employed people in Korea has been rising to add 841,000 people in June from a year earlier, but the agency said: “The outlook for the job market remains uncertain down the road.”

The Finance Ministry is scheduled to officially announce what tax reforms it will look to pursue after the Monday meeting with People Power Party leaders. They will be the first tax reform measures to be announced under the Yoon administration that kicked off in May.