Public service charges spur inflation

A recent rush to increase utility and other public service charges has been blamed for the price spiral these days.

The Korea Economic Research Institute said Sunday that rises in the rates of public utilities and other services contributed 44.8 percent to the increase in prices in the first quarter of the year.

This compares with an average contribution of 14.4 percent in the period 1990-1997, 35.3 percent in 1999 and 43.3 percent in 2000 as a result of successive rises in the costs of public utilities and services.

During the first quarter medical expenses, transportation fares and water and sewerage charges increased to push up prices 13.8 percent from a year earlier. In the January-March period retail prices rose 4.2 percent, and they would have risen only 2.7 percent had it not been for those increases in public service costs.

The institute said that such public utility and service rates should be excluded from computing the basic price index that is considered as the basis of working out price stability targets. The basic index refers to a price index calculated exclusive of the costs of agricultural commodities and energy, which fluctuate widely.

Park Won-Jae parkwj@donga.com