APEC remains concerned about oil price hike.

BANDAR SERI BEGAWAN, Nov. 10 Kyodo

The Asia-Pacific Economic Cooperation (APEC) forum, in a report presented to APEC senior officials Friday, has reiterated its concern about soaring oil prices and their impact on a fragile Asian economic recovery.

''Higher oil prices, if sustained, could pose a downside risk on the generally positive outlook of APEC economies through next year,'' said the report prepared by a committee within the group.

''The majority are oil-importing economies, so that the net effect on APEC economies as whole would be negative,'' the report, which was discussed by APEC senior officials on the first day of their two-day meeting in Brunei's capital, said.

The senior officials meeting was held to prepare for next week's summit of APEC leaders, also in the Brunei capital.

The report, which was based on a survey of member economies' assessment of the impact of high oil prices on their own economies, showed, however an optimistic view that high oil prices will not fuel a regionwide recession, mainly because developed economies such as the United States and Japan are now less dependent on oil than they used to be.

The survey ''suggests that higher oil prices this time would not result in a regionwide recession or stagflation, unlike the two oil-price hike episodes during the 1970s that triggered worldwide recessions.''

''However, a few developing member economies in the survey expect greater impacts on their economies,'' it said.

''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.''

A $5 jump in oil prices would reduce growth in Asian developing economies, which include some net oil importers, by 0.3-0.4% next year, it said. ''Generally speaking, developed member economies expect modest impacts on both income and inflation, and less developed economies expect larger impacts.''

Japan said in the survey the impact of rising oil prices on its economy would be limited in the short term and that the impact would be significantly less than in the previous oil crises.

The U.S. said the impact of higher energy and oil prices on its economy is ''substantially lower'' than it was during the earlier oil crises.

Among the countries most worried about the prices are South Korea and Thailand.

South Korea said if the price of oil is maintained at $35 a barrel, the economic outlook for 2001 will be grim, with its gross domestic product (GDP) growth falling by 2.1 percentage points to 4% and consumer prices rising by 2 points to 5%.

Thailand said if consumption remains unchanged, world oil prices at $35 per barrel would wipe out the country's current account surplus by the end of next year.

A current account deficit would put downward pressure on its currency and lead to inflationary pressure, Thailand warned, adding that interest rates would have to be raised to maintain price stability targets.

Rising inflation and interest rates in turn will raise the government's debt service costs, it said.

China said its trade surplus this year is expected to fall in response to the rise in oil prices. Net exports will also fall, resulting in lowered economic growth for this year by 0.8 percentage point, it said.

Singapore said a yearlong increase of $10 per barrel in oil prices is estimated to raise inflation by 0.8% percentage point and lower projected GDP growth by 0.6 percentage point.

Taiwan said, in the immediate future, the impact of oil price hikes on its economy will be insignificant, as its dependence on oil has greatly lessened since the second oil crisis.

In the worst-case scenario -- $40 a barrel -- economic growth this year would be pushed downward by 0.44 percentage point, it said.

Only 14 of APEC's 21 member economies responded to the survey.