South Korea's Economy Faces High Oil Prices, Government Scrambles for Solutions

As the high oil prices continue to weigh heavily on South Korea's fragile economy, government officials are racing against time to craft measures to address the issue. Analysts warn that the situation may worsen if prices fail to relent, with estimates suggesting that a $5 increase in international oil prices could result in a $5.5 billion reduction in the country's balance of trade. The government plans to discuss potential solutions at a meeting of economic ministers scheduled for Friday.

Key Takeaways:

• The South Korean government is scrambling to address the impact of high oil prices on the economy, with officials indicating that more inter-governmental discussions are needed to map out stronger measures.
• The government has already taken steps to lower import taxes on crude oil, excise taxes on oil and other fuels, and is considering further measures such as reducing traffic tax on gasoline and restricting the use of electricity at night.
• The government plans to hold a campaign to encourage public and private companies as well as individual consumers to conserve energy and may ask entertainment and public facilities to refrain from using electricity after midnight.
• Analysts estimate that a $5 increase in international oil prices would result in a $5.5 billion reduction in South Korea's balance of trade, compared to estimated losses of $4.3 billion in China, $3.5 billion in India, $2.2 billion in Thailand, and $800 million in the Philippines.

Statistics:

• Crude oil futures in New York traded at a near-record $42.90 last week, fueling speculation of rising demand and supply disruptions.
• South Korea's balance of trade loss due to a $5 increase in international oil prices is estimated to be $5.5 billion.
• Estimated losses in other countries due to a $5 increase in international oil prices: $4.3 billion (China), $3.5 billion (India), $2.2 billion (Thailand), $800 million (Philippines).
• South Korea is the world's fourth-biggest oil importer.

Sources:

• Asia Pulse (August 2)
• Yonhap News Agency