Korea's economy continues to face a high level of inflation despite continued improvements in employment and overall economic situations, the finance ministry said Thursday.

   External uncertainties such as the lingering fiscal crisis in Europe also remain high so in response the government will keep a close tab on market situations at home and abroad, according to the Ministry of Strategy and Finance.

   "We are still faced with a high level of inflation although the overall economic and employment situations continue to recover," the ministry said. "We also have to pay a close attention to economic situations as external uncertainties remain high from the fiscal crisis in Europe and a possible slowdown in major economies."

   The assessment comes as South Korea has been gripped by rising inflation, fueled by higher oil and commodity prices in the international market. Against this backdrop, the government announced its "war" against inflation earlier this year.

   South Korea's consumer prices, however, have continued to rise.

   Last month, the nation's consumer price index, a major gauge of inflation, jumped 4.4 percent from a year earlier, exceeding the government's renewed annual inflation target of 4 percent for the sixth straight month.

   Last week, the government hiked its 2011 inflation target from 3 percent to 4 percent, while lowering its growth outlook from 5 percent to 4.5 percent.

   Finance Minister Bahk Jae-wan told reporters that the downward revision of economic growth can be understood as "our strong will to bring inflation under control."

   The report reaffirmed that the government's top priority should be to tame inflation. It will also work hard to strengthen its fundamentals for sustainable economic growth.

   "We will make our top priority price stability and take active actions against any instability factors caused by inflation sentiment," the report said.

   "By boosting domestic demand and creating an environment for shared growth, we intend to increase the job-generating capability of our economy and strengthen its base for sustainable growth," it added.

   Meanwhile, the state-run think tank Korea Development Institute (KDI) also released a similar report on the nation's economic situation, expressing worries over "persistent high" inflation.

   "The Korean economy shows continuing improvement in employment conditions and persistent high inflation amid the steady pace of production growth," the KDI said.

Source: Yonhap News (July 7, 2011)