By Lee Hyo-sik
Staff Reporter
A senior finance ministry official said Wednesday that consumer prices will expand at around 4.5 percent this year from a year earlier, helped by a fall in oil and other imported commodity prices in recent weeks.
Vice Strategy and Finance Minister Kim Dong-soo said prices grew at 4.3 percent in the first half of the year, adding the average costs of various goods and services here will increase by just below 5 percent in the latter half, putting this year's inflation rate at about 4.5 percent.
``We projected that the 2008 consumer price growth would be in the mid-4 percent range in July. We do not have to revise the inflation target upward as global oil and other raw material prices have been on a downward curve over the past two months. Also, government efforts to minimize rises in utility and other public services charges will help contain price increases,'' Kim said.
In August, consumer prices rose 5.6 percent from a year earlier, showing a slower growth from the 5.9 percent gain the previous month. It was the first time consumer price growth slowed in six months, thanks to falling oil prices. Since February this year, prices had soared on skyrocketing oil and other raw material costs.
Touching on this year's economic growth, Vice Minister Kim said Korea's gross domestic product (GDP) growth will not fall below 4 percent as suggested by some economic research institutes, stressing that the government will try to help the economy expand just below 5 percent.
``When a range of economic policies, including tax cuts, is in place, the economy will grow by 4.8 to 4.9 percent from last year,'' he said. Kim also said the nation's current account deficit will fall short of the estimated $10 billion, saying continued strong exports and dropping oil prices will improve Korea's foreign trade and other international monetary transactions.
``The government will minimize hikes in electricity and gas prices to help ease financial burdens on low-income brackets. When a 4.3 trillion won supplementary budget is approved by the National Assembly, we will be better able to curb rises in public service charges,'' he noted.
Meanwhile, the Financial Services Commission (FSC) Chairman Jeon Kwang-woo told lawmakers that the regulator is considering providing tax breaks to investors in funds investing in local stocks and bonds in a bid to prop up the battered financial market.
``To help restore investor confidence and boost the demand for local securities, we are considering giving a hand to those who hold indirect equity and bond funds,'' Jeon said. In the wake of American International Group (AIG)'s liquidity shortage, he said the regulator is contemplating dispatching a supervisor to the AIG office here to monitor its capital movements and to prevent a possible money outflow.
``To protect domestic policyholders, we will keep a close eye on the AIG's operations here. But under the Insurance Business Law, all insurers operating in the country are required to hold enough assets to cover all liabilities. Those who hold AIG insurance policies will receive due payments without a problem,'' Jeon stressed.