Every year, people experience an unwelcome occurrence ahead of the Lunar New Year holiday ― a soaring price hike on basic necessities. This year is no exception. Prices of farm, dairy and fisheries products have already surged well before the holiday, which falls on Feb. 13 to 15. According to Statistics Korea, consumer prices of 152 necessities jumped 3.8 percent year-on-year last month, hitting a 14-month high.
The figure shows how inflationary pressure has been getting stronger. The price growth rate was stabilized at 1.5 percent last October, down from 1.7 percent a month earlier. But it continued to rebound to 2.3 percent in November and 3.3 percent in December. What's more worrisome is that the upward trend may continue in the coming months, making people's lives more difficult despite an anticipated recovery from the global crisis.
No doubt the price hike was the direct result of the unusually cold weather and heavy snowfall this winter. The rebounding price of crude oil imports was also partly responsible for stoking inflation. On the back of these factors, the price of spinach skyrocketed by 70 percent last month from a year ago, while the price of potatoes surged 59 percent. Prices of gasoline and of manufactured goods as well as some services charges also reported sizable increases.
Public concern is also growing over government plans to allow hikes of city gas and electricity rates in the second quarter of the year. In addition, the prices of school uniforms, learning materials and private tutoring are feared to go up considerably when the back-to-school season starts. Against this backdrop, the authorities are required to take bolder measures to nip the inflationary pressure in the bud.
Price stability is as important as economic growth. It cannot be sacrificed to facilitate a recovery from the ``Great Recession.'' Economic growth and recovery without bringing inflation under control is as futile as building a sandcastle in the pouring rain. At stake is how to achieve sustainable growth without bringing about inflation, property speculation and economic bubbles. Disappointingly, however, there are some signs of bubbles even before a full-fledged recovery.
The Korean economy showed a stronger-than-expected performance last year. And the nation is expected to become one of the world's fastest-recovering economies this year. But policymakers, businesses and individuals must realize that the ongoing recovery is the product of massive stimulus packages backed by fiscal expansion and monetary easing. So now is the time to pay more heed to potential risks of the pump-priming measures.
Fears about sovereign default in Greece and some other debt-ridden countries in the European Union are posing a threat to global efforts to get out of the reverberating economic crisis. Citing a potential double-dip risk, many policymakers believe that it is still too early to reel in the stimulus measures. But, this does not necessarily mean that the authorities can turn a deaf ear to the danger of spiraling consumer prices.
Now, we urge the authorities to take preemptive action to stave off the side effects of the economy-boosting measures. The first test is how to bring stability to consumer prices so that people can live without fears about inflation. If necessary, the central bank should not hesitate to take steps to reduce excess short-term liquidity and raise interest rates. We cannot overemphasize the importance of sustainable growth.