S. Korea's consumer price gains slow to 4.5 pct in November

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SEOUL, Dec. 1 (Yonhap) -- South Korea's consumer prices grew at a slower pace in
November than in the previous month as falling crude oil prices reduced overall
import costs, a government report showed Monday.
The consumer price index rose 4.5 percent last month from a year earlier,
decelerating from a 4.8 percent on-year advance in the previous month, according
to the National Statistical Office (NSO). From three months ago, the rate
declined 0.3 percent.
Lower inflation comes from a sharp drop in prices of oil and other commodities.
The price of Dubai crude, South Korea's benchmark, has fallen nearly US$100 since
reaching its peak in mid-July.
"Recent oil price falls contributed to eased inflationary pressure, which will
increase the leeway for the nation's central bank to lower its key interest rates
at a time when signs of an economic slowdown are abundant," said Jun Min-kyu, an
economist at Goodmorning Shinhan Securities.
This marked the fourth consecutive monthly drop in consumer prices after the
index jumped by 5.9 percent in July, the highest in almost 10 years. Still, the
figure breached the central bank's 2.5-3.5 percent target range for a 12th
straight month.
The prolonged global financial turmoil originating from the U.S. is fast
cascading into the real part of the economy, augmenting fears that South Korea's
export-driven economy may be severely affected.
According to the central bank, South Korea's gross domestic product grew 0.6
percent in the third quarter from three months earlier, marking its slowest
growth in four years.
To revive economic growth, the Bank of Korea has cut its key interest rate by 125
basis points to 4 percent since early October and will meet to review its
monetary polices on Dec. 11. Experts forecast a further reduction in borrowing
costs.
The Finance Ministry recently unveiled economic stimulus measures worth 14
trillion won (US$9.66 billion), including a 10-trillion won budget increase for
next year.
The measure is in addition to a raft of actions taken by the government to
stabilize its financial system crippled by a liquidity crunch by guaranteeing
banks' external debts for three years and signing a $30 billion currency swap
with the U.S.
The declining won, which lost around 36 percent against the greenback so far this
year, will likely continue to put upward pressure on consumer prices by making
imports costlier, experts say.
High inflation causes consumers to cut back on spending, boding ill for the
nation's economy already struggling with slumping consumption and exports amid
deepened global recession woes.
According to separate government data, sales of consumer goods dropped 3.7
percent in October from a year earlier, the sharpest decline since August 2003
when sales fell 5.9 percent.
Exports, the backbone of South Korea's economy, were also affected. The Knowledge
Economy Ministry earlier announced that the nation's November exports nosedived
18.3 percent from a year earlier, the steepest fall since February 2002 when they
declined 20.4 percent.
Against this backdrop, the government forecast that the economy will grow around
4 percent next year considering the positive effects of the latest economic
stimulus measures and despite the ongoing financial turmoil.
Major think tanks and investment banks, however, lowered their 2009 growth
projections for South Korea to around 3 percent, with Switzerland-based UBS
predicting a contraction for the first time in 11 years.
On Friday, Finance Minister Kang Man-soo reaffirmed the government's commitment
to create jobs and train workers as part of efforts to prepare the nation for a
"leap forward" when the current crisis turns into an opportunity.
kokobj@yna.co.kr
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