SEOUL (Reuters) - South Korea's finance minister said on Wednesday the recent decline in global oil prices is expected to have a "greatly positive" effect on the local economy, boosting manufacturing, exports and investment.
"Some have expressed concern over deflation, but deflation comes from a lack of demand and not from the supply side," said Finance Minister Choi Kyung-hwan at the start of a meeting with government officials.
"The recent decline in oil prices is due to supply issues...and could lead to increased income, possibly leading to bigger consumption," the minister said.
Choi added low oil prices offer a good opportunity for the economy to raise its vitality, as South Korea imports all of its oil.
His remarks echoed those of the country's central bank governor, who also shared the same sentiment earlier this week.
The minister's comments also come just as a group of prominent, mostly state-run research bodies released a report on Wednesday that oil prices will boost economic growth in South Korea this year by 0.1 to 0.2 percentage points and positively affect the economy overall.
The report also pointed out a need for price reforms in order for falling oil prices to be accurately reflected in local consumer goods, and that caution must be taken so that lower oil prices do not lead to a decline in inflation expectations.
The government now forecasts growth this year at 3.8 percent while expected inflation for the next 12 months in December fell to a record low of 2.6 percent.
Some analysts have said that the recent change of tone from policymakers for the better may delay policy easing by the Bank of Korea, which is due to next review its monetary policy on Jan. 15.
The central bank is widely expected to lower interest rates further this year after cutting them in two 25-basis-point steps in August and October last year to 2.0 percent.
(Reporting by Christine Kim; Editing by Jacqueline Wong)
Culled from Yahoo News.
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