Oil crunch may hit Korea hardest in Asia

Korea will suffer the most severe setback among Asian countries from rising oil prices, a U.S. securities firm¡¯s report said.Merrill Lynch, a U.S.-based securities firm, analyzed in its recent report titled ¡°World Economy¡± that the international crude oil prices hike will adversely affect the trade account, economic growth rate and interest rates of all Asian countries, except for Indonesia and Malaysia.Among these nations, Korea will be affected most adversely, the report said.

Merrill Lynch forecast that a US$1 increase per barrel would reduce the trade surplus of Korea by US$860 million, which is about 0.15 percent of the gross domestic product, and push up consumer price inflation by 0.1 percentage point.

In contrast, Hong Kong will see its trade surplus decrease by only US$70 million, the Philippines US$140 million, Singapore US$200 million, Taiwan US$270 million, Thailand US$280 million and China US$330 million, according to the report.The report predicted that oil prices, with West Texas Intermediary as a benchmark, would maintain the level of US$23 per barrel next year.However, if prices go up to US$33 on average, there is a possibility for Korea`s current account to record a deficit.The U.S. financial firm also forecast that if the international oil prices rise to the US$33 level, the world`s economic growth rate would be held below 3 percent, lower the currently estimated 3.3 percent, and that the export growth rate of Asian countries would decrease by 2-4 percentage points.However, Merrill Lynch observed in the report that Asian countries would alleviate the shock from the sluggish growth caused by the oil price rise by boosting the economy through the lowering of interest rates, depreciation of their currencies against the U.S. dollar and other measures.