By Kang Seung-woo
Koreans are likely to see the charges of some public services to surge in the near future, experts said Sunday. This in turn is expected to add to inflationary pressures.
According to the Ministry of Strategy and Finance and Statistics Korea, the average prices at the country’s 32 providers of public utilities, including gas and tap water, advanced 0.9 percent last month from December, representing the biggest monthly jump since September 2006 when the corresponding charges rose 1.3 percent.
Gas prices leaped 4.7 percent across the country, while tap water prices expanded 0.9 percent. Medical service prices also jumped, with costs for Oriental Medicine treatment adding 4.6 percent from a month ago.
The figure factored into a 4.1 percent year to year increase in consumer prices, surpassing the government’s target band of between 2 and 4 percent.
The government launched a package of anti-inflation measures in January, pledging to keep tight control on electricity, gas and other public services charges during the first half.
“Although the government announced its comprehensive plans to ease growing inflation concerns by keeping the charges under control, it is expected to have little effect,” said a Seoul-based economist. “The ongoing inflation forcibly contained in the first half can balloon in the latter part of the year, posing a bigger threat. In time, controls on electricity charges, for instance, will be lifted or eased.”
Another market observer said, “The impact might have limitations because the current inflation is being affected by uncontrollable factors, such as soaring prices of oil and commodities.”
There is growing evidence hinting at a price hike in public service charges, such as electricity and transportation.
According to the Ministry of Knowledge Economy, the nation’s electricity rate, which is the cheapest among those of the OECD members, is priced at 93.7 percent of its production cost, which prompted President Lee Myung-bak to recently say that the rate needs to be rationalized.
The government’s package of anti-inflation measures included the freezing of public transportation fees, but a large number of local governments are considering raising what they can due to chronic deficits.
In addition, the rising price of oil products, which affects consumer prices as well as public service charges, is also a major concern.
The price of Brent crude rose above $100 a barrel on Monday for the first time in 25 months, while the benchmark Dubai crude, which makes up the bulk of the country's imports, is on the brink of hitting the $100 mark after rising to $97.