Falling oil prices may become threat to Korean economy

By Park Sae-jin Posted : December 9, 2015, 15:07 Updated : December 9, 2015, 15:07

[Courtesy of Hyundai Heavy Industries]



Earlier this year, Choi Kyung-hwan, the Minister of Strategy and Finance, analyzed that the oil prices sliding will benefit the South Korean economy. But now, the oil prices fell more than expected and it’s threatening the economy.

When the oil prices started its freefall at the end of last year, five of Korean state-owned national research institutes predicted that Korean industries will benefit from increased net income worth of KR\ 30 trillion (U.S$ 2.6 billion). The researchers also estimated about $ 30 billion will be saved from importing crude oil.

Contrary to the research results, Korea did not benefit much from the oil prices. When oil prices fall, consumer prices fall with it. Increased rate of consumer prices this year is around 0.6 percent. It’s at the lowest point since 1958.

Regarding the government had nearly doubled the cost of cigarettes, the actual increased rate is zero percent.

Experts worry that if oil prices do not rebound at least a little, deflation will follow. With deflation, Park Sang-hyun, a researcher at High Investment Company view that real estate prices will also fall causing a major increase in the individuals‘debt.

He also noted that “If low oil prices situation gets longer, industries like shipbuilding, steel, machinery, and exports industry will be hit hard. Losing its timing to rebound its economy”

아주경제 박세진 기자 = swatchsjp@ajunews.com
 
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