Posted March. 10, 2011 10:34,
Korea`s food inflation in January grew the fastest among member countries of the Organization for Economic Cooperation and Development, the OECD said in a report Wednesday.
Inflationary pressure stemmed from supply side shocks such higher international prices of grain and commodity, while demand side factors such as a higher-than-expected inflation rate were also partially responsible. The government fears that high inflation could put a dent in economic recovery.
Korea`s food prices jumped 11.6 percent in January from a year earlier, the steepest hike among the OECD`s 34 member nations. The rate for Estonia was the second highest at 11.4 percent after leading in December last year with 12.2 percent and Korea not far behind with 10.6 percent.
Among OECD nations, only Korea and Estonia showed double-digit gains in food prices in January. The average food price increase among OECD members was 2.6 percent and the average of G-7 nations 2.1 percent.
Koreas overall consumer inflation in January was 4.1 percent, ranking fourth in the OECD following Estonia and Greece (both 5.2 percent) and Turkey (4.9 percent) and double the OECD average of 2.1 percent.
Higher food inflation in Korea stemmed from rising international farm prices from the latter half of last year caused by extreme weather. Domestically, a shortage of Napa cabbage, unseasonal cold spells and the foot-and-mouth disease outbreak were responsible.
Certain experts blame the Korean governments food price policy that still relies on farm supplies on weather and harvest even as grain imports surge. Seoul has made little progress in its bid to reduce grain imports and reliance on foreign grain by setting up grain trading companies abroad.
To stabilize food prices, experts say, Korea needs to boost its grain self-sufficiency rate, which is at a low 26 percent. Kim Hwa-nyeon, research fellow at Samsung Economic Research Institute, says, Major OECD countries have a grain self-sufficiency rate of over 100 percent, which makes them less vulnerable to rising farm prices. But the figure in Korea is extremely low, making it highly vulnerable to a global food crisis."
"The self-sufficiency rate of major grains such as corn, soybean and wheat should be raised, and technologies should be developed for cultivating vegetables in greenhouses and for seed improvements to cope with severe weather changes.
Rising consumer inflation also casts a dark cloud over Korea`s goal of 5 percent growth this year. Strategy and Finance Minister Yoon Jeung-hyun told a forum in Seoul, Growing inflationary pressure is adding uncertainties to Korea`s economic recovery. We cannot be too optimistic over whether economic recovery will continue.