From April 1 tariffs for gasoline, kerosene, diesel and heavy oil products will be slashed from three per cent to one percent, the Ministry of Strategy and Finance said in a report to a Cabinet meeting on Tuesday.

The cut is part of the government's drive to tame inflation amid rising prices of oil and other raw materials.

President Lee Myung Bak has called for quick and effective measures, saying tackling inflation is his top priority.

Inflation reached an annual rate of 3.6 per cent in February, breaching the central bank's target range for the third month in a row.

The ministry said discount outlets would be allowed to sell oil products in an effort to cut prices through competition.

It also lifted tariffs on 69 price-sensitive products including wheat, corn and nickel and identified 52 major products such as pork, eggs, milk and instant noodles for intensive price oversight.

South Korea, the world's 13th largest economy, has few natural resources and has been especially hard hit by rising global commodity prices.

It is also grappling with a recent fall in the value of the won against the dollar, which makes imports more expensive.

Bank of Korea governor Lee Seong Tae told a forum on Tuesday that a slowing global economy is posing increasing downside risks to economic growth amid rising inflationary pressures.

'The slowing global economy is forecast to hurt South Korea's exports with a time lag, but solid economic growth of emerging markets and a weaker local currency could cushion its negative impact on overseas shipments,' the central bank chief said.

However, he said rising raw materials prices are expected to slow private spending and business activities, raise import prices and put upward pressure on inflation.

The United States subprime meltdown seems to have passed its worst phase although global financial jitters may not be resolved anytime soon, he said.

The governor said the won would stabilise, describing its recent sharp fall as a temporary phenomenon.

'I believe the dollar has been ... testing how far it can go up against the won in the short run. But given that the US economic outlook is not good, the long-term outlook is for a weak dollar,' Mr Lee said. -- AFP