Cheap oil can benefit Asia says ADB

Friday, 19 December 2014 01:11 -     - {{hitsCtrl.values.hits}}

The growth outlook for developing Asia remains steady, even though momentum slowed in the second half of 2014, but the declining oil prices represent a golden opportunity for many beneficial reforms, the Asian Development Bank (ADB) says in a new report. In a supplement to its Asian Development Outlook 2014 Update, ADB forecasts Gross Domestic Product (GDP) growth for the region of 6.1% in 2014, down from 6.2% expected in September, and 6.2% in 2015, down from 6.4%. Developing Asia, comprising the 45 ADB developing member countries, grew 6.1% in 2013. Growth projections for Central Asia, East Asia, and Southeast Asia are revised downward. There is no change for South Asia. The Pacific region’s growth outlook is adjusted upward. “While growth in the first three quarters of this year was somewhat softer than we had expected,” says ADB Chief Economist Shang-Jin Wei, “declining oil prices may mean an upside surprise in 2015 as most economies are oil importers.” Recovery in the major industrial economies of the United States (US), euro area and Japan has been revised down slightly since the Update, as weak third quarter performance in Japan overshadows unexpected strength in the US. GDP growth in the advanced economies is now forecast to average 1.4% in 2014, down from 1.5% forecast in the Update, before picking up to 2.1% in 2015. With oil and commodity prices falling, most developing Asian economies have revised their inflation forecasts downward. The forecast for the region is lowered to 3.2% in 2014 and 3.5% in 2015, from the Updates 3.4% and 3.7%. “Falling global oil prices present a golden opportunity for importers like Indonesia and India to reform their costly fuel subsidy programs,” Mr. Wei emphasised. “On the other hand, oil exporters can seize the opportunity to develop their manufacturing sectors as low commodity prices tend to make their real exchange rates more competitive.”