By Kim Jae-kyoung
Staff Reporter
Import prices made the biggest jump in a decade in April due to hikes in the prices of oil and a sliding won, fanning worries over stagflation― a period of slow economic growth and high unemployment with rising prices.
The Bank of Korea (BOK) reported yesterday that import prices soared 31.3 percent in April from a year ago, the biggest monthly increase in 10 years since May 1998 when the prices surged 31.9 percent.
``Import prices in April skyrocketed due to hikes in prices of oil and raw materials, as well as weakening of the local currency,'' a central banker said.
``Since oil prices have been running higher amid continuing depreciation of the won against the dollar, it is unlikely that growth of import prices will slow down in the months to come,'' he added.
The export prices surged 15.7 percent on a year-on-year basis last month, the largest gain since November in 1998.
A ranking central banker said that the Korean economy is undergoing a situation akin to stagflation.
His remarks can be interpreted as an indication that the central bank may have become aware of symptoms of stagflation surrounding the world's 13th largest economy.
``The economy is experiencing a situation very similar to stagflation, with soaring prices amid slowing economic growth,'' BOK Deputy Governor Kim Byung-hwa told The Korea Times.
``However, I don't think that the economy is entering a phase of stagflation, given that the economy is still growing at a decent level, though it is going downhill,'' he added.
He added that in order to conclude that an economy is in stagflation, it should be either in recession or in nearly zero growth amid spiraling prices like the U.S. economy.
The U.S. economy grew only 0.6 percent in the first quarter from a quarter before, while the year-on-year growth of its producer prices have stayed above 6 percent since January.
BOK Governor Lee Seong-tae recently said, ``Growing indications show economic growth is slowing while rising inflation is weighing on consumption growth.''
At the May monetary policy meeting, the central bank revised down its growth forecast to 4.5 percent or below from its earlier projection of 4.7 percent, leaving its key rate intact at 5 percent for the ninth consecutive month.