A Triangular Tide Is Approaching

As the United States has begun to strike Afghanistan, the Korean economy that suffered from economic slump came to confront another direct hit.

If the war becomes prolonged, U.S. consumption that covers 20 percent of Korean exports will decrease, and the price for crude oil will arise rapidly due to increasing tensions in the Middle East.

Specialists are concerned that ``Payability of companies will become dull as the increase of raw material price and the decrease of exportation will take effect, and the recovery of economy will be delayed for the maximum of six months than expected.``

▽ The Crucial Moment of Macro-Economy == The scenario that specialists are concerned about is that the war will become prolonged and expand to a full-scale war with Arab nations. Korean Institute for International Economic Policy forecasted on Oct. 8 that ``If the retaliatory attacks become prolonged, U.S. economy will experience `L-type` stagnancy of business activities, and if the war expands throughout the Middle East, not only the U.S. but also the world economy will fall into a severe depression.``

Korea Center for International Finance was concerned as well that the world economy would suffer from stagnation (low-development high-price) if the war became an all-out war.

Samsung Economy Research Institute pointed out that the Korean economy would experience a triple difficulty, namely, △ the world economic slump △ the increase of oil price △ the weakening of the dollar. It explained that the Korean economy can fall into two malicious paths of `the decrease of exportationàa slump in productionàthe reduction of employmentàthe increase of unemploymentàthe decrease of income` and `the increase of oil priceàhigh prices of commoditiesàunder-consumption`.

▽ All Fields of Business Will Receive a Severe Blow If The War Becomes Prolonged == It is apparent that all fields of business will receive a severe blow if the war becomes prolonged even thought the amount of trade is not as large as the oil refinery and emulsifying industries.

Payability of companies will go bad immediately due to the added payment for war causalities insurance and the increase of oil price. Korea Trade-Investment Promotion Agency (KOTRA) forecasted that the damage to sea-borne industry would reach up to about 10 million tons if the retaliatory attack lasted for a month since the amount of sea-borne exports to the Middle East marked about 130 million tons last year.

In particular, business corporations are worried about a incident that may frustrate the orders of large-scale industrial plants placed by Middle East nations. Major business corporations such as Samsung Corporation, Hyundai Corporation and Daewoo International concluded after an immediate examination that business talks for ordering industrial plants with Middle East nations including Saudi Arabia, Arab Emirate and Israel appeared to be postponed.

The petrochemical industry is found to receive a severest blow with the rise of oil price. The oil emulsifying industry will be hardly able to satisfy the payability as the demand of emulsified products in the U.S. decreases and the oil price sharply arises. A blow to oil refinery industry will be visible at an interval of time as the decrease of oil consumption seems inevitable even thought it may saddle a part from the damages caused by the increase of oil price on consumers.

Park Won-Jae parkwj@donga.com