AsPac likely to gain from falling oil prices

MANILA, Philippines - In a related study, Standard & Poor’s Ratings Services said economies in Asia-Pacific including the Philippines are seen raking in unexpected gains amid the falling oil prices.

However, it is up to these countries on whether to use these earnings to boost their economies or to save them.

“If the oil price windfall is largely spent, the effects on GDP (gross domestic product) are highest in the Philippines, Hong Kong, China, and Thailand,” S&P said.

“In this group of economies, a one-year drop in Brent crude to $65 per barrel could raise output by one-third of one percent or more,” the debt watcher pointed out.

Looking at India and Korea, S&P said their GDP growth numbers could go up by a fifth of a percent as they have relatively larger oil trade deficits which means they have higher oil dependence.

For the rest of Asia-Pacific, the effects of decreasing oil prices on their growth are seen broadly neutral.

S&P said energy imports across the region vary in importance, with Singapore standing out with an oil trade deficit of 13 percent of GDP. This is followed by Thailand, which has an oil trade deficit of 7.6 percent, while Korea and India have oil trade deficits of about five percent of their GDP.

But in terms of value, China and Japan lead the pack with annual oil import bills reaching $300 billion.

“Spending the windfall can raise GDP in key economies while saving it will provide little or no stimulus to growth,” Paul Gruenwald, Asia-Pacific chief economist at S&P, said.

The credit rater stressed this could give Asia-Pacific economies a “timely boost” to their GDP numbers as momentum in the region has been slowing in the second half of the year.

“The key is whether the beneficiaries of the oil price windfall spend it or save it. And that, in turn, depends on their expectations regarding the future direction of oil prices,” S&P said.

Philippine economic growth decelerated to 5.3 percent in the third quarter from 6.4 percent in the second quarter.

The government hopes to grow the economy by 6.5 to 7.5 percent this year, and by seven to eight percent in 2015.