by Meriba Tulo – EM TV, Port Moresby
Importers in developing countries stand to gain substantially from the current drop in oil prices.
For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external and fiscal pressures.
The World Bank, in its latest publication of Global Economic Prospects, says the fall in oil prices provides a window of opportunity to undertake fiscal policy and structural reforms as well as fund social programs.
The report also predicts persisting soft oil prices in 2015, which will be accompanied by significant real income shifts from oil-exporting to oil-importing countries.
However, weak oil prices present significant challenges for major oil-exporting countries, which will be adversely impacted by weakening growth prospects and fiscal and external positions.
If lower oil prices persist, they could also undermine investment in new exploration or development. This would especially put at risk investment in some low-income countries, or in unconventional sources such as shale oil, tar sands and deep sea oil fields.
“In oil-exporting countries, the sharp decline in oil prices is a reminder of significant vulnerabilities inherent in highly concentrated economic activity and the necessity to reinvigorate efforts to diversify over the medium and long term,” said Ayhan Kose, Director of Development Prospects at the World Bank.