The government and the Bank of Korea have dismissed concerns of deflation that have emerged after consumer prices posted virtual negative growth last month.

First Vice Finance Minister Kim Yong-beom said on Tuesday during a meeting at the central bank that the nation’s low consumer prices are mostly due to supply-related factors rather than demand factors, downplaying concerns of deflation. 

Kim’s comments came as Statistics Korea announced earlier in the day that consumer prices in August slipped point-04 percent on-year, posting minus growth for the first time since related statistics began to be compiled in 1965. 

The vice minister was quick to add, however, that the nation’s economy could lose further vitality if consumer prices continue to trend low for a long period of time amid high economic uncertainties.

Kim pointed at the slowdown in the world economy and concerns of an extended trade war between the U.S. and China as specific uncertainties.

He then reiterated that South Korea is not facing deflation, saying that core prices are continuously posting growth of around one percent. 

Kim pointed at the drop in prices of agricultural goods and international oil as reasons for the consumer price slip in August.

He added that the cut in fuel taxes, expansion of the scope of health insurance and free school lunches further contributed to the drop.