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Lower oil price not to stimulate world economic growth: Moody's

By Park Sae-jin Posted : March 2, 2015, 16:40 Updated : March 2, 2015, 16:40


Lower oil prices will fail to spur global economic growth, though they will benefit some net oil importers, said Moody's in its quarterly Global Macro Outlook report released Wednesday.

The international credit rating agency is maintaining its growth domestic product (GDP) growth expectation of the G20 economies at 3 percent each year in 2015 and 2016, a figure which remains largely unchanged from its previous estimation in November.

The United States and India will profit from lower oil prices, Moody's forecast, with growth of 3.2 percent and 2.8 percent in 2015, respectively. The prevailing favorable economic environment in both countries will encourage consumers and companies to spend part of the gains in real incomes stemming from lower energy prices, the report said.

In the euro area, Japan, and Brazil, as well as some other net oil importers in the G20, however, are "unfavorable economic environments" for the oil prices drop to have a positive effect, due to high unemployment and resurgent political uncertainty in some euro area countries and tighter monetary and fiscal policy in Brazil which would offset the positive effect of the lower energy prices.

The credit rating agency expected the euro area and Japan's GDP growth to be below 1 percent this year, before rising slightly above that mark in 2016, while the average economic growth from 2014 to 2016 in Brazil is predicted to be around zero.

Oil producing economies among the G20, particularly Russia and Saudi Arabia, will be hit by the oil prices slump. It forecast a "sharp recession" in Russia to last until 2017.

By Ruchi Singh

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