South Korea's consumer price growth fell below the average of G7 countries for the first time in eight years in 2014, official data showed Thursday, fueling concerns that the country is heading towards a deflationary spiral.

According to data released by the Organization for Economic Cooperation and Development, South Korea's consumer price index stood at 1.3 percent last year, lower than the 1.6 percent tallied for the seven major advanced economies.

The 0.3 percentage point gap is noteworthy because the G7 -- made up of Britain, Canada, France, Germany, Italy, Japan and the United States -consists of fully developed economies that have long ago entered a period of slow growth and low inflation rates.

Of the seven, Japan, Canada, the United States and Britain reported higher CPIs vis-a-vis South Korea.

South Korea's inflation numbers only dipped below the G7 average twice before, in 1999 and in 2006. South Korea's inflation growth stood at 1.3 percent in 2013, which was on par with numbers for the Group of Seven.

Even compared to the 34 member OECD's average of 1.7 percent, South Korea's CPI was lower, marking the second year in a row that the country's inflation numbers remained locked in the 1 percent range.

The sluggish showing is way short of the Bank of Korea's 2.5-3.5 percent mid-range inflation target.

Related to the numbers, some economists claimed the country has effectively entered a period or deflation and argued the central bank needs to further lower key interest rates to buoy growth.

The country's key interest rate stands at an all time low of 2 percent.

"Weak consumer demand is making low inflation a systemic problem and because at least 2-3 percent annual price gains is needed to keep the economy vibrant, interest rates need to come down further," Sung Tae-yoon, professor at the School of Economics at Seoul's Yonsei University.

Other observers said that the BOK will probably not take immediate action to adjust rates right now, but it could take such a step if the growth rate does not pick up steam.

The central bank forecast growth will likely reach 3.0 percent in the first half, with numbers projected to rise 3.7 percent in the July-December period.

Despite alarm bells being sounded, the finance ministry claimed weak inflation numbers are due to a sharp drop in crude oil prices.

Policymakers also said that South Korea was technically in disinflation and not deflation, with all signs pointing towards a gradual rebound in consumer spending in the coming months. (Yonhap)