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Oil Report

S.Korea to grow at 3 pct if oil hits $200-Goldman

SEOUL, June 30 (Reuters) - South Korea’s economy would see growth plunge to 3.0 percent, the slowest since contracting in 1998, should crude oil prices rise and stay above $200 a barrel, but would likely avoid recession, Goldman Sachs said on Monday.

Goldman forecasts Asia’s fourth-largest economy will expand 4.8 percent this year, down slightly from growth of 5.0 percent last year and 5.1 percent in 2006.

South Korea’s annual consumer-price inflation would jump to 8.0 percent on average if Brent crude rises and remains above $200 a barrel, from a 4.4 percent forecast for this year, the investment bank said in a research note.

“Economic activity would slow down but an outright recession could be avoided through a macro policy mix of exchange rate adjustment and external financing, energy-saving structural reforms and continued commitment to open trade,” it said.

South Korea's won KRW= would weaken by about 6 percent against the dollar in real terms and the country would be able to cut back oil consumption volume by 10 percent through energy-saving structural reforms, it said.

The forecast comes amid spreading fears that skyrocketing oil prices would have an especially severe impact on South Korea, which has to import all its crude oil.

Brent crude LCOc1 was last quoted at $141.86 per barrel on Monday, up 51 percent so far this year and double the price of a year earlier at $71.41. (Reporting by Yoo Choonsik; Editing by Keiron Henderson)

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