Falling Oil Spells Boon for Most of Asia’s Economies

Wall Street Journal ^ | Jan. 4, 2015 | ERIC YEP

[thackney]

Tumbling oil prices could prove to be a boon for the many Asian economies that depend on crude imports.

With oil at its lowest price in more than five years, governments in countries such as India and Indonesia can spend money on much-needed infrastructure and other growth projects without stoking inflation. Falling crude prices also give China’s flagging economy a boost, allowing its central bank—and others in the region—to ease rates even as a recovering U.S. looks to do the reverse, economists say.

Combined with loose monetary policy and a gradual recovery in global demand for goods and services, falling oil prices should help lift emerging Asia’s gross-domestic-product growth this year to 4.7% from an estimated 4.3% in 2014, according to Capital Economics, a consulting firm.

“The decline in oil prices really took people by surprise,” said Cedric Chehab, head of research at Business Monitor International, a unit of Fitch Ratings. Sliding oil prices, he said, are “undoubtedly good for consumers, but the effect across Asia is going to be asymmetrical.”

Oil accounts for as much as 18% of total imports in Asia, excluding Japan, or about 3.4% of its total GDP, according to Bank of America Merrill Lynch. And oil makes up 18% of Japan’s imports, or 3.3% of its GDP, according to Capital Economics.

The decline in oil prices should boost GDP growth in the Asia-Pacific region by 0.25% to 0.5%, said Rajiv Biswas, Asia-Pacific chief economist at consulting firm IHS. That comes as slowing growth in China and Japan should be weighing on the region’s economies.

Of Asia’s economies, none is more dependent on oil imports than China. The country spent $234.4 billion to import oil in 2013....

[DaveA37]

What an opportunity for the U.S. to take over as the world economy leader much like the Saudi’s have done for years. We have the oil and the means to deliver, what we lack is the leadership to make it happen.

[thackney]

what we lack is the leadership to make it happen

What actions would you suggest?

[woodbutcher1963]

Another article from a couple weeks ago pointed out that the lowering of gasoline to low income people more directly affects companies like Walmart, Target or inexpensive dining establishments. If you have an extra $20-30/week to spend, this type of consumer is not going to put it into the stock market or zero coupon bonds. They are going to spend it at the grocery store or Walmart or Home Depot. Where does Walmart get most of its products: China.
So, China will benefit not only from the lowering of its imported energy costs. It will benefit from the increase in consumer spending.

On another point, another group of companies that should get a boost from the current exchange rate is European tourism companies. If I had been thinking about a European vacation, this would be the summer to go just based on the Euro/US dollar.