Low oil prices feared to hurt Korean exports

A prolonged downturn in international crude prices is feared to have a negative impact on South Korea's exports by hitting emerging markets and Middle Eastern countries, watchers said Sunday.

Hurt by concerns over growth of the world economy and a supply glut, oil prices sank below the $30 a barrel last week for the first time in 12 years.

Falling oil prices are widely seen as a boon to South Korea, which depends entirely on imports for its oil needs, as they usually lead to lower production costs and help drive down consumer inflation.

But the recent tumble has sparked concerns that it could make a dent in South Korea's exports and thus have a negative impact on the growth of Asia's fourth-largest economy.

According to local experts, sinking international oil prices have pounded emerging markets, making it harder for South Korean companies to sell goods in those countries. Nearly 58 percent of South Korea's exports go to emerging market.

"Benefits from low oil prices are expected to be limited this year," said Lee Keun-tae, a senior economist at LG Economic Research Institute. "Falling crude prices are a big drag on emerging economies, which will inevitably hurt South Korean exports."

In addition, oil exporting countries in the Middle East are faced with acute fiscal crises, which have led to a tumble in construction, shipbuilding and plant orders won by South Korean companies from those countries.

Last year, South Korean builders bagged orders worth $14.7 billion from Middle Eastern countries, down a whopping 52 percent from the previous year and the lowest annual amount since 2006.

A growing number of global financial institutions have revised down their forecasts of oil prices, escalating uncertainty over the future performance of the South Korean economy.

The finance ministry said low international crude prices will do more good than harm though their positive effects on the economy have weakened.

Last week, the Bank of Korea cut its 2016 economic growth forecast to 3 percent from an earlier 3.2 percent, citing growing risks for emerging markets and the global financial market.

In order to cope with difficulties stemming from low oil prices, market watchers called on local companies to pump up efforts to make their products more competitive in overseas markets. (Yonhap)