Korea: Top officials say high oil prices could force government's hand

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Korea: Top officials say high oil prices could force government's hand

If oil prices average above $35 per barrel next year, the government will modify key macroeconomic projections and take contingent energy demand and supply measures, the Ministry of Finance and Economy said yesterday.

In a meeting with ruling party legislators, economic ministers said the nation's current account balance would record a $1 billion deficit next year if oil prices reach the $30 level.

The ministers said the government will have credit insurance funds provide 12 trillion won worth of additional guarantees to bring some relief to the financial sector.

If Dubai oil stays at $27 through this year and the next, Korea's current account balance would meet its $10 billion surplus goal this year and record $5-$6 billion in surplus next year. Also, inflation would grow 2.4 percent this year and 3.2 percent in 2001, while GDP growth would stand at 8.5 percent and 6.0 percent next year.

However, if the price of Dubai remains at $30 for long, the projections would need to be adjusted to a $9 billion surplus this year and a $1 billion deficit in 2001, inflation would rise 2.6 percent this year and 3.5 percent in 2001, while GDP growth would slow to 8.3 percent this year and 5.8 percent next year.

If crude oil prices hit $35, next year's GDP growth would deteriorate to below 4 percent, consumer prices would jump 5 percent and the country would see a $5 billion deficit.

However, ministry officials said that the government would implement emergency energy conservation measures to raise next year's GDP growth rate to around 5-6 percent, keep inflation within 3 percent and maintain a positive current account balance.

In regards to the recent breakdown of the Ford-Daewoo talks, the top policymakers said that Ford's $7 billion offer to acquire Daewoo Motor in June was not a binding-offer. They said the sales process would adopt a binding-offer method to prevent the recurrence of such an event.

An announcement in Daewoo's renewed auction scheduling will be announced today, officials added.

Meanwhile, the government will also expand the guarantee capacity of Korea Credit Guarantee Fund and the Korea Technology Credit Guarantee Fund by 12 trillion won so that they can provide more guarantees to corporate debt issues.

The economic ministers said the government would make efforts to complete the so-called big deals in the rolling stock sector by the end of the year and those in the petrochemical and aerospace industries by February next year. Updated: 09/20/2000

http://www.koreaherald.co.kr/news/2000/09/__05/20000920_0510.htm

-- Carl Jenkins (Somewherepress@aol.com), September 19, 2000


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