Korea still faces high level of inflation: minister

Korea is still facing a high level of inflation despite easing price hikes in recent months, the top economic policymaker said Monday, calling for more efforts to tackle structural problems to guarantee longer-term price stability.

"The overall inflation level remains high and the real burden that ordinary people are feeling in their life has yet to be reduced significantly," Finance Minister Bahk Jae-wan told an anti-inflation meeting.

South Korea's consumer prices rose 3.9 percent last month from a year earlier, marking the first time this year that the price hike has fallen below the government's annual inflation target of 4 percent for 2011.

The slowing pace of price growth was attributed partly to falling farm product costs, which used to be one of major factors that exerted significant upward pressure on inflation over the past year.

Bahk still cautioned that there are upside and downside factors coexisting in the market that could affect inflation situations. He called for stepped-up efforts to tackle structural problems and induce long-term price stability.

As for the "thrift gas stations" that the government is pushing, Bahk hoped that they could serve as a chance to improve the distribution process and bolster competition in the market so as to result in price declines at the pump.

Last week, the government announced that it will set up 1,300 such gas stations selling cheaper gasoline and diesel by 2015 as part of an ongoing effort to control inflationary pressure. They plan to reduce prices by receiving lower-priced fuel than ordinary gas stations from state-run suppliers.

Meanwhile, Bahk said during a parliamentary committee to review the government's 2012 budget plan that the nation's recovery seems to be moderating, raising concern that the ongoing global fiscal crisis could drag down its export-driven economy.

"We cannot rule out the possibility that our economy could get swept by the ongoing global fiscal crisis if that crisis deepens and goes out of control," Bahk told lawmakers.

"We need to prepare for any changing economic conditions at home and abroad, while strengthening our fiscal capacity as a possible policy tool and also expanding the macroeconomic policy leeway by improving overall economic health," he added.

(Yonhap)