ID :
18815
Wed, 09/10/2008 - 15:41
Auther :
Shortlink :
https://oananews.org//node/18815
The shortlink copeid
(News Focus) Oil price drop may help stabilize Korean economy
By Lee Joon-seung
SEOUL, Sept. 10 (Yonhap) -- The drop in crude oil prices below the
US$100-per-barrel mark is expected to help stabilize a South Korean economy plagued by inflationary pressure, experts said Wednesday.
Economists and government officials said the drop in oil prices could help bring down consumer prices, which rose to 5.6 percent in August from an average gain of 2.5 percent in 2007.
Inflation affects consumer buying power, leading to a slowdown in the domestic
economy and hurting production and employment.
The Korea National Oil Corp. (KNOC) said spot prices of Dubai crude, which make
up the bulk of South Korea's imports, fell to $98.95 per barrel on Tuesday, the
lowest in five months. On July 3, the price reached a record $140.70 per barrel
from an average of $71.13 for the whole of last year.
The rise in crude oil and other raw materials played a part in compelling
policymakers to adjust downward South Korea's growth target from 6 percent to the
upper 4 percent levels. It is also raised doubts about the ability of the economy
to create what the government hoped would be 200,000 new jobs this year. In
August only 159,000 new jobs were created.
Experts said the decline in worldwide demand, along with a strong dollar and an
exodus of hedge funds away from commodities, are all contributing to the steady
decline in prices. They added that even instability in the Middle East or the
risk of a hurricane causing damage along the Gulf of Mexico may not really affect
the downward momentum.
"Prices are likely to continue falling and dip to $90 per barrel in
2009," said Lee Jee-hoon, chief researcher at Samsung Economic Research
Institute (SERI).
His view was echoed by Oh Jeong-seok, an analyst at the state-run Korea Center
for International Finance.
"There is no real pressure for oil prices to rise again until the end of the
year, and this will remain true even if OPEC decides to cut production in a bid
to raise prices," he said.
Reflecting the upbeat mood, government insiders said current trends could finally
breathe new life into the sluggish economy, even if current prices are about 39
percent more expensive than the average last year.
"Stable oil prices could permit the country to post a trade surplus in the
remaining four months of the year, which will help reduce the overall
imbalance," said Chung Jae-hoon, head of the Knowledge Ministry's trade
investment office. As of last month, the country's trade deficit fell in the red
by over $11.5 billion, compared to a surplus of $8.4 billion for the same period
last year.
"A reduction in the trade deficit can help stabilize foreign exchange rates
that are directly related to consumer prices and production," Chung added.
Despite such optimism, some have raised concerns that economic conditions in
newly emerging economies like China and India may start exerting a negative
influence on South Korean exports.
At present, roughly 60 percent of South Korea's exports head for developing
countries that have been less hurt by the economic crunch felt in the advanced
industrialized economies.
"If these countries start to feel the pinch, then South Korea could be in
for some tough times in the first half of 2009," a government official who
declined to be identified, said.
Reflecting such cautious views, South Korean companies said they plan to maintain
a conservative stance for the time being.
Transportation companies, including Korean Air and Asiana, said that while the
drop in crude oil prices has helped, prices are still much higher than last year,
putting a dent in earnings and hurting limited investments.
Similar concerns are shared by Samsung Electronics Co., LG and Hyundai Motor Co.,
all of which are carefully watching market developments at home and abroad.
Companies said they will have to adjust sales and production strategies depending
on the effects oil prices have on consumer sentiment and demand.
yonngong@yna.co.kr
(END)
SEOUL, Sept. 10 (Yonhap) -- The drop in crude oil prices below the
US$100-per-barrel mark is expected to help stabilize a South Korean economy plagued by inflationary pressure, experts said Wednesday.
Economists and government officials said the drop in oil prices could help bring down consumer prices, which rose to 5.6 percent in August from an average gain of 2.5 percent in 2007.
Inflation affects consumer buying power, leading to a slowdown in the domestic
economy and hurting production and employment.
The Korea National Oil Corp. (KNOC) said spot prices of Dubai crude, which make
up the bulk of South Korea's imports, fell to $98.95 per barrel on Tuesday, the
lowest in five months. On July 3, the price reached a record $140.70 per barrel
from an average of $71.13 for the whole of last year.
The rise in crude oil and other raw materials played a part in compelling
policymakers to adjust downward South Korea's growth target from 6 percent to the
upper 4 percent levels. It is also raised doubts about the ability of the economy
to create what the government hoped would be 200,000 new jobs this year. In
August only 159,000 new jobs were created.
Experts said the decline in worldwide demand, along with a strong dollar and an
exodus of hedge funds away from commodities, are all contributing to the steady
decline in prices. They added that even instability in the Middle East or the
risk of a hurricane causing damage along the Gulf of Mexico may not really affect
the downward momentum.
"Prices are likely to continue falling and dip to $90 per barrel in
2009," said Lee Jee-hoon, chief researcher at Samsung Economic Research
Institute (SERI).
His view was echoed by Oh Jeong-seok, an analyst at the state-run Korea Center
for International Finance.
"There is no real pressure for oil prices to rise again until the end of the
year, and this will remain true even if OPEC decides to cut production in a bid
to raise prices," he said.
Reflecting the upbeat mood, government insiders said current trends could finally
breathe new life into the sluggish economy, even if current prices are about 39
percent more expensive than the average last year.
"Stable oil prices could permit the country to post a trade surplus in the
remaining four months of the year, which will help reduce the overall
imbalance," said Chung Jae-hoon, head of the Knowledge Ministry's trade
investment office. As of last month, the country's trade deficit fell in the red
by over $11.5 billion, compared to a surplus of $8.4 billion for the same period
last year.
"A reduction in the trade deficit can help stabilize foreign exchange rates
that are directly related to consumer prices and production," Chung added.
Despite such optimism, some have raised concerns that economic conditions in
newly emerging economies like China and India may start exerting a negative
influence on South Korean exports.
At present, roughly 60 percent of South Korea's exports head for developing
countries that have been less hurt by the economic crunch felt in the advanced
industrialized economies.
"If these countries start to feel the pinch, then South Korea could be in
for some tough times in the first half of 2009," a government official who
declined to be identified, said.
Reflecting such cautious views, South Korean companies said they plan to maintain
a conservative stance for the time being.
Transportation companies, including Korean Air and Asiana, said that while the
drop in crude oil prices has helped, prices are still much higher than last year,
putting a dent in earnings and hurting limited investments.
Similar concerns are shared by Samsung Electronics Co., LG and Hyundai Motor Co.,
all of which are carefully watching market developments at home and abroad.
Companies said they will have to adjust sales and production strategies depending
on the effects oil prices have on consumer sentiment and demand.
yonngong@yna.co.kr
(END)
