World Economic Outlook notes that all net importers are better off when price falls.
The World Economic Outlook released by the International Monetary Fund this morning shows that oil prices have fallen by about 45 per cent since September and have led to a major reallocation of real income from oil exporters to oil importers. “For the oil price, it really depends on whether the country is an exporter or an oil importer,” Mr. Gian Maria Milesi-Ferretti, Deputy Director of the Research Department of the IMF, told VET. “Countries that are net importers of oil are going to benefit because the decline in oil import prices would raise disposable income. For example, If the price declines lead to a decline in gasoline prices, then it have direct benefits to consumers. If you are an oil exporter, the effects are negative, for instance because most oil exporters rely on oil revenue to finance government spending, and hence need to adjust spending or taxes to compensate for lower oil revenues.”
Vietnam exports crude oil but must also import finished petroleum products. It is expected to benefit from the lower oil price through several channels. First, a lower oil price is expected to raise real income and consumption and is expected to lower the cost of production of final goods, thus raising investment and company profits. It is consumers who will be the biggest beneficiaries from oil and petrol price decreases. The national economy will also benefit because businesses can cut transport costs and production costs. In turn, they can then sell products at lower prices, which will help stimulate domestic demand.
The latest figures from General Statistics Office show that Vietnam imported 850,000 tons of petrol in March while exporting 800,000 tons of crude oil. The total petrol imported in 2014 was 8.4 million tons and the total crude oil exported was 9.1 million tons.
According to the World Economic Outlook, global growth is forecast at 3.5 per cent in 2015 and 3.8 per cent in 2016; broadly the same as last year. But this aggregate number masks diverse developments. “A number of complex forces are shaping prospects around the world,” said Mr. Olivier Blanchard, IMF Economic Counselor and Director of Research. “Legacies from both the financial and the euro area crises - weak banks and high levels of public, corporate, and household debt - are still weighing on spending and growth in some countries. Low growth in turn makes deleveraging a slow process.”
Asia’s growth is forecast to hold steady in 2015 and the region is expected to continue to outperform the rest of the world over the medium term. The World Economic Outlook projects that GDP in Vietnam in 2015 will be 6 per cent but will fall to 5.8 per cent in 2016.