RISING risks of deflation in major economies have renewed worries about global growth, but sliding prices for oil and other commodities should boost most of Southeast Asia.
In much of the region, “consumers are going to feel a lot richer”, said economist Gareth Leather at Capital Economics. “The benefits to growth are quite significant.”
Since June, the price of a barrel of Brent crude has dropped by 25 per cent to US$86 (RM281), which means big savings for Southeast Asia’s large oil-importing economies — Thailand, the Philippines and Indonesia.
Anthony Jude, senior adviser to the Asian Development Bank’s energy section, said lower oil prices also give some countries “an opportunity to remove subsidies”.
For Thailand, whose economy has floundered for a year due to political turmoil and faltering exports, cheaper oil could mean faster growth. Its annual growth rate will rise 0.45 percentage points for every 10 per cent fall in oil prices, according to Bank of America Merrill Lynch.
For Indonesia, cheap oil means the new president could rid the country of crippling energy subsidies relatively painlessly.
Elsewhere, central banks may be able to keep interest rates down for longer, although these will need to rise when the United States Federal Reserve starts hiking US levels, which many expect by mid-2015.
In addition to oil, there have been falls in global prices of some foodstuff Southeast Asia imports such as wheat and soyabean.
Where governments don’t stand in the way of falling prices, cheaper food and fuel should leave consumers with more disposable income. This, in turn, should stimulate domestic consumption, which is pivotal when demand in large export markets such as Europe and Japan is stagnant. Reuters