Lower global oil prices would serve as a “modest” offset to the adverse impact of the COVID-19 outbreak on the Philippine economy, UK-based Oxford Economics said.
“Under the current period of extreme uncertainty, the economic boost from a decline in oil prices will be modest. Relative to previous oil price collapses, monetary authorities will find it difficult to respond to the negative demand shock as deflationary pressures mount,” Oxford Economics economists Gabriel Sterne and Luka Raznatovic said in a March 10 report titled “Weak oil a modest global offset to coronavirus impact.”
Over the weekend, world oil prices plunged to a four-year low of about $30 per barrel due to fears the spread of the new virus causing COVID-19 was curtailing global demand amid slower travel, tourism and manufacturing. These, coupled with the failure of the Organization of the Petroleum Exporting Countries to agree on production cuts, Oxford Economics noted.
If global oil prices stayed at the $30-per-barrel level for the rest of the year, an additional 0.5-1 percent could be added to the Philippines’ gross domestic product (GDP), Oxford Economics estimates showed.
Also based on this price scenario, inflation in the Philippines would be reduced by about 0.9 percentage point from baseline.
Besides the Philippines, other big “winners” from an oil price slump would be China, India, Indonesia and Argentina. On the other hand, Russia, Saudi Arabia, the United Arab Emirates (UAE), Mexico, Australia, Norway, Romania and Malaysia would be the “losers,” Oxford Economics said.
On a global level, a low oil price environment would add 0.3 percent to world GDP, the think tank added.
Among emerging markets, India, China, the UAE, Indonesia, Poland, Bulgaria and Slovenia would also see a 0.8-1.3 percentage point reduction in inflation. —BEN O. DE VERA