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An opportunity for East Asia in plunging oil prices

Axel van Trotsenburg's picture
Image "Pro Pit" by Aaron Webb is licensed under CC BY-NC-SA 2.0
Image "Pro Pit" by Aaron Webb is licensed under CC BY-NC-SA 2.0

“Never let an opportunity pass by, but always think twice before acting,” says a Japanese proverb with particular pertinence for East Asia today.

Plunging oil prices present a significant opportunity for most of the region’s developing countries to strengthen the competitiveness of their economies and take advantage of the ongoing global recovery.

The drop in oil prices — over 50% since mid-2014 — reflects several years of increasing oil supply, particularly in North America, along with decreased geopolitical risks to global production, OPEC’s efforts to maintain production levels and market share, and weaker-than-expected global growth last year. These factors are likely to persist, with oil prices expected to remain low through at least 2016.

Most countries in East Asia, including Japan, benefit from the price decline because they are oil importers. They can expect more rapid economic growth, lower inflation and improved current account balances.

Oil is Well that Ends Well

Francisco G. Carneiro's picture


Why are petroleum prices dropping so fast anyway? Have they reached rock bottom yet? Should we be worried if they continue to fall? These are questions that probably every finance minister in either oil-rich or oil importing nations is trying to answer.  

Prospects Daily: World Bank sees Global recovery facing headwinds

Global Macroeconomics Team's picture

 

Important develoments today:

1. World Bank releases ‘Global Economic Prospects’ report, highlighting risks to world recovery

2. China’s net purchase of Japanese long-term government debt reaches record high

3. U.S. Fed Chairman Bernanke: ‘Uneven’ recovery…watch excessive budget cuts

4. OPEC: no consensus on output quotas