The Asia-Pacific region is unlikely to face a new inflationary spiral linked to soaring crude prices, but oil-dependent economies such as South Korea could be hurt, APEC warned Saturday.
"Higher oil prices, if sustained, could pose a downside risk on the generally positive outlook of APEC economies through next year," said a report by the Asia-Pacific Economic Cooperation forum's economic committee.
The 21 APEC economies currently meeting in Brunei include oil producers such as Canada and Mexico which stand to gain from crude prices hovering well over 30 dollars a barrel, a level not seen since the 1990 Gulf War.
But even they would lose out if the high oil price depressed economic activity among key trading partners, the APEC report by economic committee chairman Mitsuru Taniuchi said.
"The potential effect of pushing inflation higher is a concern for all economies, but most economies expect rather modest increases in inflation, since their oil dependency is low and inflation has remained subdued," it added.
Oil assessments carried out by 14 APEC members suggested that a region-wide recession or stagflation -- depressed growth coupled with high inflation -- as seen in the 1970s oil shocks were not a pressing fear.
"However, a few developing member economies in the survey expect greater impacts on their economies," said the report by Taniuchi, who is a deputy director general of coordination in Japan's Economic Planning Agency.
"They have significantly increased oil dependency due to industrialization and motorization. There is a concern that higher oil prices, if sustained, would set back the recovery from the Asian crisis."
South Korea and Thailand were at particular risk of relapsing just as they emerge from the devastating regional crisis of 1997, warned Taniuchi.
South Korea's government expected an oil price of 35 dollars a barrel through next year would depress growth by two percentage points, compared to the current forecast of six-percent growth in 2001, he noted.
"Thailand, which has increased oil dependency in recent years like Korea, expects significant unfavorable impacts on income, inflation and trade balance, if higher oil prices don't come down."
With a prolonged price per barrel of 35 dollars, Thailand could expect to see its current-account surplus vanish by the end of next year, the report said.
China, although an oil producer, is still a net importer of oil.
"On balance, China expects that, if higher oil prices continue, trade balance and economic growth would be lowered and inflation would rise," the APEC survey said.
However, the region's two most oil-thirsty nations, Japan and the United States, were at far less risk of a new energy shock.
Both have significantly reduced their reliance on oil as a share of gross domestic product, but could expect a slight upturn in inflation if high prices persist, APEC reported -- BANDAR SERI BEGAWAN (AFP)
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