By Kim Yon-se
Staff Reporter

The Bank of Korea (BOK) is considering revising down its macroeconomic predictions one more time as the world’s crude oil prices soar to their highest level in 21 years.

Uneasiness and uncertainty are growing over surging oil prices and there is a high possibility that prices, such as those of Brent and Dubai, will rise more, BOK director general Lee Ju-yeol told The Korea Times on Friday.

``Should oil prices continue to stay above $40 a barrel, we would have no choice but to lower the nation’s growth target,’’ he said. ``The gap of $5 between our estimation of $35 per barrel and the current $40 per barrel is very significant.’’

The central bank revised its growth target to 5.2 percent a few weeks ago but it now has no choice but to lower the prediction again, he hinted, saying, ``Oil prices are the most influential factor in the economic outlook.’’

Amid skyrocketing oil prices, Korea’s GDP growth in 2004 may stay below 5 percent as the 5.2 percent estimation is based on the assumption of an average price of $35 a barrel for Brent crude.

Lee added the BOK will make a decision concerning a revision of the macroeconomic forecast after analyzing incoming data for oil price predictions from energy research institutes at home and abroad.

Last year most economists predicted oil prices would stabilize at $26 a barrel this year thanks to the end of the war in Iraq, he said. ``We are deeply concerned over the nation’s import prices and inflationary pressure.’’

Fears of a possible disruption in Russian oil supplies sent crude oil futures soaring past $43 a barrel for the first time ever on Wednesday. U.S. light crude rose as high at $43.05 a barrel, the highest since the futures contract began trading on the New York Mercantile Exchange in 1983.

In its revised outlook released July 8, the BOK predicted the growth rate would slow to 5 percent in the second half, down from its initial estimate of 5.6 percent.

In April, the central bank said the nation’s 2004 GDP growth would come to 5.4 percent, with 5.2 percent for the first half and 5.6 percent for the second half. But it decided to adjust the prediction downwards due to the prolonged slump in domestic demand and a surge in oil prices.

Private think tanks are also poised to lower their growth targets, saying that the economic growth rate will decline in proportion to the surge in oil prices.

LG Economic Research Institute (LGERI) said oil prices will rise to an average of $38 per barrel, up from its initial estimate of $36. According to LGERI’s prediction, the nation’s growth rate will be around the 4 percent level.

It estimated that GDP would grow by 5 percent his year. Saying that Korea imports crude amounting to $800 million per annum, it claims the GDP growth will fall by 0.1 percentage point with each $1 increase in oil prices.

The LGERI also expected consumer prices to rise 0.15 percentage point and the trade surplus to drop by $800 million with each 1 percent rise in oil prices.

Samsung Economic Research Institute is also concerned about the instability of oil prices, expressing anxiety over a possible surge in consumer prices and import prices as well as a major drop in the trade surplus.

kys@koreatimes.co.kr