S. Korea to Cut Tariffs to Fight Inflation

SEOUL, South Korea -- South Korea will cut import tariffs on gasoline and three other fuels and exempt duties on dozens of other products to help ease price pressures amid surging global costs for oil and commodities, the Ministry of Strategy and Finance said Tuesday.

The government will cut import tariffs on gasoline, kerosene, diesel and heavy oil to 1 percent from the current 3 percent each, the ministry said in a statement. The government will also exempt import tariffs on 69 products, including grain and industrial raw materials.

The tariff changes will be effective April 1, it said.

In another move to stabilize consumer prices, the government plans to increase low-tariff imports of 14 items including corn and soybeans this year.

The government expects the measures to help lower consumer and import prices by about 0.1 percent and 0.27 percent, respectively, the ministry said.

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South Korea's consumer price inflation rate stood at 3.6 percent in February from the same month the year before, above the central bank's inflation target band of between 2.5 percent and 3.5 percent for the third month in a row.

The ministry also said that the government has selected 52 items for close monitoring to curb inflation.

The ministry said in a separate statement that the selected items — such as rice, flour, shampoo, mobile service charges, and bus and subway fares -- affect everyday lives and it will look for ways to prevent a spike in their costs.

"The government can't force price cuts but can help curb a rise in prices," Yim Jong-ryong, director general at the strategy and finance ministry's economic policy bureau, told reporters. He said the government can, for example, exempt tariffs on flour and freeze electricity charges.

South Korean President Lee Myung-bak said in newspaper interviews over the weekend that the country's top economic priority is fighting inflation.

Separately, the governor of the Bank of Korea said that slowing growth in the United States as well as other large economies and rising commodities prices are expected to have a negative impact on South Korea.

"The economic slowdown in the U.S. and other advanced nations will (hurt) domestic exports," Lee Seong-tae, the central bank chief, said in a speech prepared for delivery Tuesday at a forum for businessmen.

Lee also said rising international raw materials costs will contribute to domestic inflation, deterring household spending and weighing on industrial activity.

"Korea depends mostly on imports for supplies of raw materials, so recent increases in crude oil and grain prices are directly linked to a rise in domestic inflation," Lee said.

However, Lee also said the recent depreciation of South Korea's currency, the won, and an increase in demand from newly developing countries would limit the expected decline in exports.

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