Oil prices are believed to be biggest threat to economy

High oil prices are the biggest threat to South Korea's economy and have already hurt growth this year, Finance Minister Han Duck-soo pointed out Monday.

"The main downside risk for the Korean economy at present is high oil prices," Han stressed, adding that they have shaved off about one percent from economic expansion so far in 2005.

In the meanwhile economic growth in resource-poor South Korea, which imports almost all of its crude oil, accelerated in the third quarter on rising domestic consumption and robust exports.

Gross domestic product grew 1.8 percent in the July-September quarter from the second quarter, when the economy expanded 1.2 percent. From a year earlier, the economy grew 4.4 percent, outpacing the second quarter's 3.3 percent expansion.

Recent economic indicators show consumer spending has been gathering momentum after households were able to reduce debt. A rise in personal bankruptcies because of massive credit card liabilities earlier in the decade hurt consumer spending in South Korea, Asia's fourth-largest economy after Japan, China and India.

Consumer spending has been recovering "mainly due to very severe restructuring on the part of our households and individuals," Han said.

Han also said that year-on-year economic growth in the fourth quarter will be "a little higher" than the third quarter's 4.4 percent expansion. He said he expects growth of around 5 percent in 2006 with expansion supported by consumer spending, exports and capital investment, the AP reports.

V.Y.