South Korean Finance Minister Choi Kyung-hwan said Wednesday that low oil prices are positive for the country's economy, seeking to relieve worry about possible deflation.
Choi, who also assumes the post of deputy prime minister, said during the meeting of economy-related ministers that deflation comes from a lack of demand, and global oil price fall stemmed from supply-side factors.
The minister said lower oil prices are a great positive factor for the South Korean economy, noting that it would lead to a rise in real income and boost domestic demand.
His comments came amid growing concerns over deflation in the economy, where consumers delay consumption on expectations for lower prices, and it cause a stagnant economy especially in private consumption.
The country's consumer prices rose 1.3 percent in 2014 from a year earlier, marking the lowest gain since 1999. It was far below the Bank of Korea (BOK)'s mid-term inflation target band of 2.5 percent to 3.5 percent.
Dubai crude, South Korea's benchmark, traded below 50 U.S. dollars per barrel overnight, bolstering expectations for further fall in oil prices and lower headline inflation.
Some experts expected the BOK to cut its benchmark interest rate by 50 basis points this year to 1.5 percent on low inflation and sluggish economic growth. The bank lowered borrowing costs in August and October last year to a record low of 2 percent.
If global oil prices average 63 dollars a barrel in 2015, it could bring an effect of about 30 trillion won (27 billion U.S. dollars) rise in real income this year, according to five state- run think tanks adding that low oil prices may reduce import costs of oil by about 30 billion dollars.