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.
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.
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.
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.