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Lower prices to slightly boost global growth: IMF

Latest Update: July 15, 2015 | 198 Views
Oil-Price-IMF

WASHINGTON: Lower oil prices are expected to modestly boost growth in the global economy, by about a half percentage point in 2015-2016, according to an IMF report released Tuesday.

“Lower oil prices should translate into higher spending and therefore support global growth,” the International Monetary Fund said.

“But other shocks are expected to offset this positive effect,” the global crisis lender said, pointing to such factors as a slowdown in growth in the emerging-market and developing economies.

Last week the IMF lowered its 2015 global economic growth forecast to 3.3 percent from 3.5 percent and held unchanged its 3.8 percent estimate for 2016.

In the report, the IMF emphasized that “the speed and magnitude of the oil price decline has the potential to trigger financial strains, which could reduce the global benefits of lower oil prices, although the effects have so far been contained.”

It cited some positive impacts from the slide in oil prices, such as lower prices for gasoline and domestic energy, notably in Europe, and a much smaller decline in the Middle East and sub-Saharan Africa.

The IMF noted that higher oil production, rather than weakening demand, was the driver in the 50 percent drop in oil prices between mid-2014 and early 2015.

“While increased financial flows into oil in recent years may have contributed to increased volatility of oil prices, it is hard to find clear evidence of speculative forces or financialization during the price decline,” it said.

The 188-nation institution emphasized the high uncertainty of the price outlook, but said that a “substantial part” of the price decline was expected to persist in the medium term.

The futures markets were implying Brent oil prices, currently trading around $52 a barrel, would increase to roughly $75 in 2020, it said.

“But recent experience including the Brent price rally to about $65 a barrel in April suggests there may be considerable volatility around this upward trend.”

AFP