Oil prices expected to cut Asia growth

Next year, the region economic growth would fall to 6.2 per cent from the 6.9 per cent of 2004.

Bangkok (AsiaNews/Agencies) - High and volatile oil prices will continue to restrain economic growth in the Asia-Pacific region next year, a United Nations agency said in a report released yesterday. The Economic and Social Commission for Asia and the Pacific (Escap) said the region's economic growth would fall to 6.2 per cent next year from an estimated 6.9 per cent this year and 6.2 per cent last year if the average oil price was US a barrel next year compared with US this year.

"Overall, the outlook for 2005 has deteriorated," Escap executive secretary Kim Hak-su said. "Virtually all forecasts suggest that there is likely to be a modest deceleration of output growth."

Net oil importers in Asia - especially the mainland, Taiwan, India, and Thailand - had already experienced upward pressures on overall consumer prices this year as a result of higher commodity prices, higher capacity utilisation and higher oil prices, Mr Kim said. "If prices remain at their present levels up to mid-2005, there could be a modest adverse impact on gross domestic product growth in the region in 2005," Mr Kim said. Oil prices climbed to about US a barrel in Asia trade yesterday after hitting a near five-month low on Friday on doubts about the Organisation of Petroleum Exporting Countries' resolve to cut daily output by one million barrels. Yesterday's rise was a reaction to Saudi Arabia, which cut January crude deliveries to clients in Asia, confirming that the top exporter was adhering to Opec's agreement last week to curb excess supply.

However, Escap said oil prices were likely to remain volatile for several more months. Escap said that based on past experience, every US rise in oil prices sustained for 12 months would cut GDP growth in Asian economies by 0.8 of a percentage point. The report said the impact occurred first through the rise in inflation and through lower consumer demand as higher oil prices affected domestic prices and consumption. A secondary impact occurred with a lag as the same effects were felt by importers, Escap said.