Korea’s major think tanks are expected to revise up their 2011 inflation outlooks for the country as oil and commodity prices are rising at a faster-than-expected pace.
Industry sources said Tuesday that the nation’s leading private-sector think tank Samsung Economic Research Institute will likely raise its inflation outlook to mid-3 percent from its previous forecast of about 3 percent.
LG Economic Research Institute is expected to revise up its inflation outlook from 3.1 percent to mid-3 percent. The state-run Korea Development Institute is also reportedly considering raising its inflation forecast from its earlier 3.2 percent growth projection, they noted.
The figures are all higher than the government’s target of stabilizing inflation at around 3 percent this year. The revision is apparently aimed at reflecting soaring crude oil prices prompted by concerns over supply amid ongoing turmoil in oil-rich countries in North Africa and the Middle East.
“In our December report, we could not predict such unrest unfolding in Libya and other Middle Eastern countries,” said Kwon Sun-woo, an economist at the Samsung Economic Research Institute.
“We still do not expect the average crude prices for this year to exceed $100 per barrel but they could rise more than that if instability in those regions continues,” he added.
In its latest report, LG Economic Research Institute projected average oil prices for this year at $87.70 per barrel but it might increase the outlook to about $90 per barrel in its upcoming report, an official of the think tank said.
Experts say that rising oil and commodity prices are feared to hamper economic growth as the nation depends heavily on imports for such materials. Korea is the world’s fifth-largest oil importer.
In its economic outlook unveiled in December, the government predicted that the economy would grow about 5 percent this year, assuming that average crude oil prices stay at around $85 per barrel.
Korea’s government is struggling to contain inflationary pressure caused by soaring oil and commodity prices as crude oil prices topped $100 per barrel in recent trading.
In a related move, the government raised its energy alert level to better cope with rising crude prices and it also reduced import duties on major raw materials in a way to ease price hikes in the domestic market.
Korea, Asia’s fourth-largest crude buyer, increased oil imports for a 10th month as the global economic recovery spurred refiners to increase fuel exports while cold weather boosted domestic heating demand.
Imports rose to 70.8 million barrels in February from 65.5 million barrels a year earlier, the Ministry of Knowledge Economy said Tuesday.
Oil-product exports jumped 61 percent by value while shipments of petrochemicals rose 24 percent, boosted by the global economic recovery, the ministry said. The average temperature in Seoul last month was 1.2 degrees Celsius, compared with 1.4 degrees Celsius a year earlier, according to the Korea Meteorological Administration.
Korea’s crude import bill gained 34 percent to $6.8 billion in February as Asian benchmark Dubai prices jumped 36 percent to $100.20 a barrel, the ministry said. Gas import costs were up by 5.2 percent while coal imports increased 63 percent.