Thu | Sep 20, 2018

'Falling oil prices, a timely opportunity for developing countries'

Published:Thursday | January 8, 2015 | 10:23 AM

A new report by the World Bank Group says lower oil prices have provided a timely opportunity for developing countries to rebuild fiscal space to weather future growth slowdowns.

The new edition of Global Economic Prospects released yesterday says developing countries are faced with weaker export prospects, an impending rise in global interest rates, and fragile financial market sentiment.

It says these countries therefore need to rebuild fiscal buffers to support economic activity in case of a growth slowdown.

The report notes that in countries with elevated domestic debt or inflation, monetary policy options to deal with a potential slowdown are constrained.

And it says in the foreseeable future, these countries may need to employ fiscal stimulus measures to support growth.

However, the report notes that many developing countries have less fiscal space now than they did prior to 2008, having used fiscal stimulus during the global financial crisis.

This is why it says for a number of oil-importing countries, like Jamaica, lower oil prices offer a chance to improve fiscal positions more quickly than might have been possible before mid-2014.

According to the report, soft oil prices are expected to persist in 2015 and will be accompanied by significant real income shifts from oil-exporting to oil-importing countries.

It says for many oil-importing countries, lower prices contribute to growth and reduce inflationary, external, and fiscal pressures.


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