23 Dec 2014
Lower oil price expected to boost global growth – BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, notes that IMF’s Chief Economist Blanchard feels that lower oil prices will help boost the global growth by 0.3-0.7% in 2015, with major beneficiaries expected to be the economies of China and India.
Key Quotes
“The benefits to the rest of the world from lower oil prices are likely to boost the outlook for global growth. In a blog released on IMFdirect yesterday, IMF Chief Economist Blanchard and Head of Commodities Arezki blogged that according to their simulations, global growth will be boosted by between 0.3 to 0.7 percent in 2015 from the sharp decline in the price of crude oil.”
“They estimate that around 20-35% of the decline in the price of crude oil has resulted from weaker demand concluding that it is mainly a positive supply shock for the global economy.”
“The blog also adds that the real income effect of lower oil prices is smaller for the US which now produces over half of the oil it consumes than for the euro-zone and Japan. China and India will also benefit more from lower energy prices given that they remain substantially more energy intensive than advanced economies. Oil consumption accounts for 5.4% and 7.5% of GDP in China and India respectively compared to 3.8% of GDP in the US.”
“According to their simulations, economic growth in China will be boosted by 0.4 to 0.7 percent in 2015 and 0.5 to 0.9 percent in 2016. Economic growth in the US will be boosted by 0.2-0.5 percent in 2015 and 0.3-0.6 percent in 2016.”
“They also noted that the recent weakening of the euro and yen which has dampened the decline in the price of crude oil will mute somewhat the economic boost for the euro-zone and Japan.
Key Quotes
“The benefits to the rest of the world from lower oil prices are likely to boost the outlook for global growth. In a blog released on IMFdirect yesterday, IMF Chief Economist Blanchard and Head of Commodities Arezki blogged that according to their simulations, global growth will be boosted by between 0.3 to 0.7 percent in 2015 from the sharp decline in the price of crude oil.”
“They estimate that around 20-35% of the decline in the price of crude oil has resulted from weaker demand concluding that it is mainly a positive supply shock for the global economy.”
“The blog also adds that the real income effect of lower oil prices is smaller for the US which now produces over half of the oil it consumes than for the euro-zone and Japan. China and India will also benefit more from lower energy prices given that they remain substantially more energy intensive than advanced economies. Oil consumption accounts for 5.4% and 7.5% of GDP in China and India respectively compared to 3.8% of GDP in the US.”
“According to their simulations, economic growth in China will be boosted by 0.4 to 0.7 percent in 2015 and 0.5 to 0.9 percent in 2016. Economic growth in the US will be boosted by 0.2-0.5 percent in 2015 and 0.3-0.6 percent in 2016.”
“They also noted that the recent weakening of the euro and yen which has dampened the decline in the price of crude oil will mute somewhat the economic boost for the euro-zone and Japan.