Asia's economies have been able to withstand this year's surge in oil prices but the relentless climb is starting to take its toll and high growth rates are now in jeopardy, analysts said.
Crude futures prices reached historic highs at nearly US$45 a barrel last week, causing a slump in regional stock markets and prompting economists to draw up scenarios based on prices breaching US$50 a barrel.
"If energy prices come back down to what we think supply and demand should have them right now, probably around US$30 a barrel, it's not a big deal," David Wyss, chief global economist at US credit rating firm Standard & Poor's, told reporters in Singapore on Friday.
"If they stay where they are now, it's a minor problem. But if they go up to US$70 to US$80 a barrel then you have got some real problems in Asia and everywhere else too."
Joseph Tan, an economist with Standard Chartered Bank in Singapore, said the "big question" was how long oil prices would stay between US$42 to US$50 a barrel.
If prices stayed between these levels for most of the year, then this would impact on Asian growth, Tan said, adding however he thinks prices will ease in the next few months.
He also pointed out any impact "will not be homogeneous given that some countries are more dependent on oil than others," with South Korea, India and Thailand among the most vulnerable.
Ifzal Ali, chief economist of the Manila-based Asian Development Bank (ADB), said the bank's economists recently went back to the drawing board to plot a scenario where prices reach US$50 a barrel.
A bank study in June on the impact of high oil prices on Asia had assumed levels of up to US$40 a barrel.
High oil prices are now a "serious threat not only to Asia but globally as well," Ali told reporters by telephone on Friday.
"The thing is if this increase in oil prices is combined with an increase in interest rates, that would be even more damaging," he said, referring to moves by the US Federal Reserve to raise key interest rates.
Oil prices at US$50 a barrel could shave off 1.1 percentage points from Asia's projected GDP growth next year, compared with 0.8 percent if prices remained at US$40 a barrel, Ali said.
China's GDP would be trimmed by 1.1 percentage points and India's 1.2 percentage points, compared with 0.8 percent for both countries if prices were at US$40 a barrel.
At US$50 a barrel, Asia's trade balance by the end next year would deteriorate 0.9 percentage points and inflation would rise by 1.9 percentage points.
Oil-importing Southeast Asian nations would also be in the line of fire.
For example, the Philippines' GDP would shed 2.6 percentage points if oil prices reached US$50 a barrel, inflation would rise 2.7 percentage points and the trade balance would worsen by 2.1 percentage points.
Thailand's GDP would lose 3.1 percentage points, inflation would increase 2.8 points and trade would worsen by 2.6 points, according to the ADB.
But Standard Chartered's Tan said he believed current high oil prices would not be sustained because this was being caused chiefly by the financial problems of Russian oil giant Yukos, which produces more oil than Libya, a member of the Organization of Petroleum Exporting Countries.
Fears Yukos will shut down its 1.7 million barrels a day production due to a tax dispute with the Russian government sent oil prices soaring its highs last week.
Julian Jessop, chief international economist of London-based research house Capital Economics, said he believed Yukos and Moscow were playing a game of "brinkmanship" and Russian authorities were unlikely to stop production.
But the ADB's Ali said oil prices should stay above US$40 a barrel until the end of this year because, apart from the Yukos factor, the problem of supply disruptions in oil-producers Iraq, Venezuela and Nigeria remained.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS