BAKU, Azerbaijan, July 21. Severe oil price spike will set off significant inflation increase followed by national banks tightening monetary policy, Trend reports via Asian Development Outlook (ADO) 2022.
“Under this scenario, developing Asia experiences a marked slowdown in growth to 3.2 percent in 2022 - 1.4 percentage points below the baseline. In 2023, growth in the region accelerates to 4.5 percent, but remains 0.7 percentage points below the baseline. Headline inflation will surge even higher, to 5.8 percent in 2022 and 5.3 percent in 2023,” the report said.
Another scenario includes global financial shock to be faced in 2023, due to growing concerns about the global recession.
“Here, developing Asia will grow by only 2.2 percent in 2023 and the G3 and several economies in the region will contract. Under this scenario, developing Asia’s GDP by the end of 2023 will be about 4 percent lower than the baseline, which is about two-thirds of the size of the COVID-19 shock in 2020,” ADO noted.
Meanwhile, Asian Development Bank (ADB) does not rule out the possibility of oil prices peaking at $200 per barrel in the coming months.
“The possibility of a supply shock that leads to an oil price spike as high as $200 per barrel cannot be ruled out. An escalation of the war in Ukraine could be followed by an immediate EU ban on Russian oil. If that happens, it is unlikely that other oil exporting countries will be able to fill the resulting shortfall of 3.5-7 million barrels a day in the short run,” the report said.
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