"As long as oil prices remain low, the direct effects will be positive on trade balances and downward on inflation in most Asian countries," says Thomas Byrne, a Moody's Senior Vice President/Manager, Asia Pacific and Middle East.
"Lower inflation and import costs, in turn, will likely support growth by raising consumer purchasing power, lowering investment input costs and increasing monetary policy flexibility. However, growth acceleration may be checked by lower global growth and international financial uncertainty in 2015," adds Atsi Sheth, a Moody's Senior Vice-President.
Moody's notes that in Malaysia (A3 positive), Indonesia (Baa3 stable) and India (Baa3 stable), lower oil prices led to fuel subsidy reforms, which support their sovereign credit profiles. But in Indonesia and Malaysia, lower hydrocarbon-related government revenues will erode the impact of these gains on the budget balance.
Crude prices more than halved between June 2014 and January 2015, reflecting higher-than-expected oil production in the US and lower demand in emerging markets.
Moody's has lowered its price assumptions for Brent crude to $55/barrel through 2015 and $65/barrel in 2016. While it expects oil prices to eventually rebound as demand increases and low prices create an eventual supply response as producers reduce their capital spending, this supply response will not be meaningful until at least 2016.
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