Uncertainties Evident in Many Aspects of Economy This Yr
There are numerous economic uncertainties for Korea this year despite the obvious and positive aspects of the market, the LG Economic Research Institute said yesterday.
In a report, LG researchers said there are naturally strong prospects that Korea will continue its recovery this year but there are many negative factors that must be considered.
A potential recession in the American economy, high oil prices, depreciation of the Japanese yen and the adverse effects of the April general elections are just some of these factors.
The U.S. economy, for instance, has been enjoying one of its longest booms in recent memory with growth estimated at a high 4 percent last year and is looking ahead to another strong year.
However, the United States also had a record-high trade deficit of $300 billion last year which amounts to 3.5 percent of its gross domestic product (GDP) and this is expected to increase further to 4 percent this year, the LG researchers said.
With the enormous trade deficit, there are concerns the American economy may come crashing down rather than making a soft landing and this will have a powerful impact on the Korean economy.
Another economic concern for this year is the soaring price of oil resulting from cuts in production by members of OPEC (Organization of Oil Producing Countries).
While the Ministry of Commerce, Industry and Energy and other expert organizations predict that oil prices will average out at $20-23, a high end of the range will mean that Korea will have to spend an additional $5 billion on imports of petroleum this year.
As for the Japanese yen, it has remained strong since September 1998, in the 100 yen per $1 range, and this is expected to continue for the time being although the possibility of the Japanese economy slumping this year and pulling the yen down with it cannot be ruled out. …