TG: Low oil prices will do little to stimulate global growth, Moody's says
Lower oil prices will do little to spur global growth in the next two years as the world economy is buffeted by events in the eurozone, China and Russia, a credit-rating agency has said.
Analysts at Moody’s said the big fall in the price of oil since the summer should, in theory, boost economic output by cutting costs for businesses and consumers. But in its global macro outlook report, Moody’s left its estimates for growth among G20 countries at less than 3% – broadly unchanged from last year’s rate and Moody’s earlier 2015 forecast in November.
Marie Diron, who wrote the report, said: “A range of factors will offset the windfall income gains from cheaper energy. In the euro area, the fall in oil prices takes place in an unfavourable economic climate, with high unemployment, low or negative inflation and resurgent political uncertainty in some countries.”
Gains in real household incomes in the eurozone will be suppressed by joblessness and prices barely rising or falling. People worried about losing their job are likely to save and not spend any extra money, Diron said.
The analysts left their UK growth forecast unchanged at between 2% and 3% for the next two years. George Osborne has said the falling price of oil is good news for the British economy.
Moody’s based its estimates on Brent crude prices averaging $55 a barrel this year and $65 next year. The price plunged from $115 a barrel last June to below $50 in January but has risen slightly since.
Brent crude fell 90 cents to $55.53 on Wednesday morning. The price tumbled below $58 on Tuesday after the International Energy Agency said the US shale boom, which has increased the global supply of oil, would cause prices to settle well below levels of the past few years.
Higher energy taxes and government price controls will reduce the effect of lower oil prices in China, where growth will slow this year and next. Russia and Saudi Arabia, both big oil producers, will be hit with Russia suffering a sharp recession until 2017, Moody’s said.
The main gainers from continuing low oil prices will be the US and India, Moody’s said, increasing its forecast for US growth in 2015 to 3.2% from 3%.
