60 seconds with Rajeev De Mello on why lower oil prices could lift Asian economies

The dramatic fall in the cost of oil should help countries like India keep control of inflation, interest rates and fiscal policy and could boost economic growth, says Rajeev De Mello.

20 January 2016

Rajeev De Mello

Rajeev De Mello

Head of Asian Fixed Income

Asia boost from falling oil

Oil prices have fallen substantially over the last 18 months and the scope of the fall has been dramatic.

A lot of investors are concerned that this will have a negative impact on overall emerging markets.

However, there are countries which are big beneficiaries of these low oil prices, and they are mainly in Asia.

Asian countries consume a lot of oil. They import a large part of their energy and commodity requirements, so they should be the first beneficiaries of this fall.

Countries like India, Thailand, and South Korea are all big beneficiaries through various mechanisms.

Consumer boost

With lower energy prices, inflation rates generally drop, which is very positive because central banks can cut interest rates and consumers have higher spending power.

The cost of subsidising items like fertilisers and oil products also falls, easing the burden on fiscal spending tools. This improves the fiscal position, so, lower oil prices are actually good for Asia.

Important Information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.