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183548
Sun, 05/22/2011 - 07:05
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https://oananews.org//node/183548
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KDI hikes inflation outlook for S. Korea to 4.1 pct
SEOUL (Yonhap) - A major state-run think tank Sunday sharply raised its 2011 inflation outlook for South Korea, calling for the nation's central bank to actively seek to normalize its prolonged low borrowing costs to help stabilize prices.
The Korea Development Institute (KDI) raised its inflation projection for Korea to 4.1 percent from the previous outlook of 3.2 percent. That is much higher than the government's official target to stabilize inflation at around 3 percent this year.
Consumer prices will grow 4.3 percent in both the second and third quarters from a year earlier before easing to 3.3 percent in the fourth quarter, the KDI said in a report. For next year, consumer prices will stay at 3.3 percent, it added.
The forecast is based on spiking crude oil prices, which affect product and service prices in Korea as the nation depends heavily on imports for its energy needs.
Average import costs for crude oil will likely stay at $105 per barrel this year, up 35 percent from a year earlier, the report showed.
Citing such growing inflationary pressure, the KDI expressed concerns over the protracted low level of key interest rates, saying that the central bank should actively seek normalization of its loosened monetary policy.
The Bank of Korea recently froze its key interest rate at 3 percent for the second straight month, saying that economic uncertainty such as unstable oil prices and the eurozone debt crisis persists.
The rate freeze came after the central bank increased the borrowing rate four times from a record low of 2 percent since July last year. The move still comes as a surprise as many expected the central bank to lower borrowing costs to help ease inflationary pressure.
"The current interest rate level remains low given the overall economic state," the report said. "We cannot expect that growing inflation expectations to be eased as long as such a low-rate policy direction continues."
Despite worries over inflation, the think tank kept its growth outlook unchanged at 4.2 percent, citing robust economic recovery in the world, a factor that will boost the nation's exports in overseas markets.
Exports in terms of volume will expand 12.8 percent this year, while imports will also grow 12.1 percent, the report showed.
Its forecast for the current account surplus, however, was revised down to US$11.2 billion from its earlier outlook of $15.2 billion due to sky-high oil prices and the impact of the stronger local currency on trade. For next year, the amount will further decline to $8.2 billion.
Regarding labor markets, the KDI forecast that the nation's unemployment rate will stand at 3.5 percent this year before lowering to 3.3 percent in 2012.
The Korea Development Institute (KDI) raised its inflation projection for Korea to 4.1 percent from the previous outlook of 3.2 percent. That is much higher than the government's official target to stabilize inflation at around 3 percent this year.
Consumer prices will grow 4.3 percent in both the second and third quarters from a year earlier before easing to 3.3 percent in the fourth quarter, the KDI said in a report. For next year, consumer prices will stay at 3.3 percent, it added.
The forecast is based on spiking crude oil prices, which affect product and service prices in Korea as the nation depends heavily on imports for its energy needs.
Average import costs for crude oil will likely stay at $105 per barrel this year, up 35 percent from a year earlier, the report showed.
Citing such growing inflationary pressure, the KDI expressed concerns over the protracted low level of key interest rates, saying that the central bank should actively seek normalization of its loosened monetary policy.
The Bank of Korea recently froze its key interest rate at 3 percent for the second straight month, saying that economic uncertainty such as unstable oil prices and the eurozone debt crisis persists.
The rate freeze came after the central bank increased the borrowing rate four times from a record low of 2 percent since July last year. The move still comes as a surprise as many expected the central bank to lower borrowing costs to help ease inflationary pressure.
"The current interest rate level remains low given the overall economic state," the report said. "We cannot expect that growing inflation expectations to be eased as long as such a low-rate policy direction continues."
Despite worries over inflation, the think tank kept its growth outlook unchanged at 4.2 percent, citing robust economic recovery in the world, a factor that will boost the nation's exports in overseas markets.
Exports in terms of volume will expand 12.8 percent this year, while imports will also grow 12.1 percent, the report showed.
Its forecast for the current account surplus, however, was revised down to US$11.2 billion from its earlier outlook of $15.2 billion due to sky-high oil prices and the impact of the stronger local currency on trade. For next year, the amount will further decline to $8.2 billion.
Regarding labor markets, the KDI forecast that the nation's unemployment rate will stand at 3.5 percent this year before lowering to 3.3 percent in 2012.
