S. Korea may reduce tariffs- taxes to curb inflation

SEOUL: South Korea is considering cutting taxes and tariffs on oil and other products to try to curb inflation, President Lee Myung-Bak said Tuesday as figures showed a sharp rise in prices.

Seoul has made fighting inflation its economic priority this year and pressure rose on the government to act after data showed prices continued upwards in January due to the increasing cost of food and energy.

In a televised interview Lee described the issue as a serious problem and said: "(The government) is reviewing whether to reduce taxes and import tariffs on things like oil prices."

The consumer price index rose 4.1 percent in January from a year earlier, Statistics Korea said Tuesday, and increased 0.9 percent month-on-month.

Those figures compared with December's 3.5 percent year-on-year rise and 0.6 percent month-on-month.

Prices of fresh food products jumped 30.2 percent from a year earlier and oil and energy costs rose 10.9 percent.

The central bank last month unexpectedly raised the benchmark interest rate 25 basis points to 2.75 percent in a bid to tame rising prices and also unveiled a set of other measures to keep inflation in check.

Lee stuck to its forecast of around five percent economic growth this year, following 6.1 percent in 2010.

"But I am worried about inflation... the government needs to work at the forefront of efforts to tame inflation," he said, describing rising food prices as an international concern.

The government said that in addition to global trends, January inflation was also fuelled by a major outbreak of foot-and-mouth disease and abnormally cold weather in Korea.

Separate figures released Tuesday showed the export-dependent nation posted a healthy trade surplus in January for the 12th straight month, although it was well down on the previous month.

The $2.96 billion figure compares with a surplus of just over $4 billion in December, the Ministry of Knowledge Economy said in its preliminary figures.