Thailand, Malaysia and the Philippines will be adversely affected if crude-oil prices reach the critical level of US$130 per barrel this year, the United Nations Economic and Social Commission for Asia and the Pacific (Escap) says.
“Oil prices could reduce growth [in gross domestic product] by up to 1 per cent for some countries in 2011,” said Nagesh Kumar, Escap chief economist of macroeconomic policy and the development division, launching the Economic and Social Survey of Asia and the Pacific 2011.
Rising food and oil prices could plunge 42 million more people into poverty, joining the 19 million added last year, he warned.
The impact of oil prices on growth in the Asia-Pacific region is significant, because of the high energy intensity of production in the region.
In the baseline scenario of crude-oil prices of $105 per barrel and food prices rising 27 per cent, the GDP growth of developing countries in Asia-Pacific would be cut by 0.47 percentage point on average.
If Brent crude-oil prices were to increase to $130 per barrel, these countries would experience an even more adverse scenario, with output growth declining from the baseline by 0.47 percentage point, according to the survey.
“The countries most adversely affected in terms of inflationary impact would be Malaysia, the Philippines and Thailand,” warns the survey. In the baseline scenario, Thai economic growth would be reduced by half a percentage point, or 1.1 percentage points in the worst case. GDP growth in the Philippines would slow by 1.54 percentage points and in Malaysia by 0.91 point.
Escap forecasts that the Thai economy will expand 4.5 per cent this year, down from 7.8-per-cent growth last year.
If average crude-oil prices rose to $115 per barrel, this would cut the growth of developing economies by 0.64 percentage point and Thailand’s by 0.72 percentage point.
The report urges the Group of 20 nations to act decisively to moderate the volatility of oil and food prices.
This could include the G-20 regulating commodity markets to reduce speculation, as well as restricting the conversion of food into biofuels.
The oil-consumer cartel created recently by the G-20 may use oil reserves as a tool to pressure the Organisation of the Oil Producing Countries, Kumar said.
Oil-consumer countries usually use oil reserves when crude-oil prices shoot up.
The practice causes prices to fall, resulting in oil-price volatility. Opec does not like price volatility, so it is beneficial for both importing and exporting countries to negotiate to stabilise oil prices, Kumar said.
There is huge potential for regional cooperation in energy because of the large network of exporters and importers in the Asia-Pacific region, he said.
According to the report, between 1992 and 2008, demand for primary energy (mainly crude oil, natural gas and coal) from Escap economies rose from 36.7 per cent to 45.2 per cent of the global total. China, India, Japan and Russia were among the top five consumers, accounting for 71 per cent of Asia-Pacific consumption and 32 per cent of the world’s consumption.
The region’s largest exporter of primary energy is Russia (589 million tonnes of oil equivalent in 2008). Other important net exporters are Australia, Indonesia, Iran, Kazakhstan, Turkmenistan and Azerbaijan.
Source: The Nation