The recent sharp decline in global crude oil prices will slow down economic growth in Nigeria, Russia and the United Arab Emirates, according to Capital Economics analysts.
The international oil benchmark, Brent crude, plunged to around $58 per barrel last Friday, after rising to a four-year high of $86.74 per barrel early last month. It hovered around $60 per barrel on Wednesday.
The Capital Economics analysts estimated that every $10-per-barrel fall in oil prices would boost incomes by about 0.5 to 0.7 per cent of gross domestic product in major emerging market oil importers.
The same discount will cause a three per cent to five per cent loss of Gross Domestic Product in most of the Gulf economies, and a slowdown of 1.5 per cent to two per cent of GDP in the UAE, Russia and Nigeria, all on an annualised basis, according to the analysts.
Bloomberg reported on Tuesday that just a couple of months ago, major oil trading houses were predicting the return of $100 crude.
It said energy importers like India and South Africa would benefit from the drop in oil prices while oil producers such as Russia and Saudi Arabia would hurt.
Central banks under pressure to raise interest rates are expected to get a reprieve, while those looking to revive prices, such as the Bank of Japan, would face another headwind.
The report said, “Ultimately, much depends on how world oil demand shapes up as it gets battered by a stronger dollar and global trade spats, and how the biggest producers react.
“Saudi Arabia sits between Russia on one side, its ally in managing production to support prices, and the US, where President Donald Trump is sending Twitter messages to the producer to get prices down.
“All eyes are on the Group of 20 meeting this week to see if a consensus on output emerges between the Saudis and Russians, and if that can carry through to the OPEC gathering next week.”
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