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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.

01/20/2016

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.