Current Account Deficit to Break $10 Bln This Year

The Korea National Oil Corp. and the Korea Energy Economics Institute will raise their forecasts for average oil prices this year to between 84 and 89 dollars per barrel, up more than ten dollars.

The Strategy and Finance Ministry said yesterday that it initially expected the current account deficit to reach seven billion dollars based on the forecast that average oil prices would stay around 80 dollars per barrel. Since oil prices are expected to steadily increase, some experts say the current account deficit will surpass 10 billion dollars.

A government source said yesterday, “We’ll hold a conference of international oil price experts Thursday at the Korea National Oil Corp. on new forecasts for this year’s average oil price.”

The energy institute is expected to raise its price forecast for Dubai crude oil from 74 dollars per barrel to 86. The oil corporation will also raise its estimate from 77.5 dollars per barrel to 87.5.

Private institutions and government agencies will take part in the oil conference, including the energy institute, the oil corporation and the Bank of Korea.

The government has released its own forecasts for a variety of economic indicators ahead of the conference.

A Finance Ministry source said, “The government initially predicted a trade surplus of 13 billion dollars this year, but it won’t be easy to record a trade surplus due to surging oil prices. We’ll drastically cut our expectations for this year’s trade balance.”

The government and the Korea International Trade Association say the trade surplus falls five billion dollars when the price of oil increases five dollars per barrel.

Private economic think tanks say the current account deficit will surpass 10 billion dollars this year and could even reach 12 billion dollars.

Hwang In-seong, a senior researcher at Samsung Economic Research Institute, said, “Even if oil prices stabilize, Korea’s current account balance will record a relatively small surplus or deficit over the next several years.”

The average price of Dubai crude between January and Thursday last week was 91.92 dollars per barrel, but set a record high of 102.58 dollars Friday.

parky@donga.com changkim@donga.com