Baku, Azerbaijan, Nov.26
By Leman Zeynalova – Trend:
The fall in oil prices is likely to support GDP growth in some of the major emerging market (EM) oil importers such as India and South Africa, said a report released by the UK-based Capital Economics consulting company.
“Even as oil prices rose earlier this year, we argued that they would reverse course later in 2018. In the event, the price of Brent crude has already reached our end-2019 forecast of $60 per barrel, down from a recent peak of $86 per barrel early last month,” said the company.
The company believes that the economic impact of the fall in oil prices arises from changes in the terms of trade and thus current account positions.
“On an annualized basis, every $10 per barrel fall in oil prices boosts incomes by about 0.5- 0.7 percent of GDP in major EM oil importers, such as Turkey, India, South Africa, Korea, Chile, the Philippines and Thailand. For a few countries, like Ukraine, the improvement in the terms of trade is even larger,” said the company.
The big losers are, of course, the energy producers, according to Capital Economics.
“By our estimates, every $10 per barrel drop in the price of oil is likely to result in a decline of 3-5 percent of GDP in most of the Gulf economies, and by 1.5-2 percent of GDP in the UAE, Russia and Nigeria (all on an annualized basis). Most oil revenues accrue to governments, so budget balances will also deteriorate,” said the report.
The company experts believe that the fall in oil prices is likely to support GDP growth in some of the major EM oil importers such as India and South Africa.
“That said, many of the EMs with the largest net energy import bills relative to the size of their economies, e.g. Turkey, Pakistan and Jordan, run large current account deficits and are facing strains in their balance of payments. Their windfalls seem more likely to be saved,” said Capital Economics.
The oil producers facing more severe challenges are those such as Bahrain and Oman which were running external deficits even when oil prices were at $70-80 per barrel, according to the UK-based consulting company.
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