The World Bank on Wednesday said the low-income and developing countries could get a better fiscal space from the gain of the lower fuel oil price in the global market as the price declining trend will continue during the year of 2015.
The Bank said: "Soft oil prices are expected to persist in 2015 and will be accompanied by significant real income shifts from oil-exporting to oil-importing countries. For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external, and fiscal pressures."
"Oil prices are expected to remain low in 2015 and rise only marginally in 2016," said the World Bank in its Global Economic Prospects (GEP), released Wednesday.
Price of the refined oil at the international market is reported nearly US$60 per barrel, down more than 40 per cent from June this year, and that of crude oil is about $45 per barrel.
Bangladesh is one of the beneficiary countries from the declining oil price trend in the international markets as the government will get some fiscal space from its higher spending on subsidies. Bangladesh spends nearly $5.0 billion for importing fuel oil every year.
"Gains from low oil prices can be substantial for developing-country importers if supported by stronger global growth," said the Bank report, which was released from its Washington headquarters Wednesday.
"With oil likely to remain cheap for some time, oil-importing countries should lower or even eliminate fuel subsidies and rebuild the fiscal space needed to carry out future stimulus efforts. On the policy front, both the size and the quality of fiscal deficits matter, as do spending decisions. Emerging market economies would do well to invest in infrastructure and support social schemes vital to poverty reduction. Such policies can raise future productivity and reduce the fiscal deficit in the long run," said Kaushik Basu, Chief Economist of the World Bank.
The World Bank report, however, said 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."
The World Bank's GEP report also said faced with weaker export prospects, an impending rise in global interest rates, and fragile financial market sentiment, developing countries need to rebuild fiscal buffers to support economic activities in case of a growth slowdown.
For many developing economies, lower oil prices have provided a timely opportunity for doing so, it said.
"The decline in oil prices reflects a confluence of factors, including several years of upward surprises in oil supply and downward surprises in demand, receding geopolitical risks in some areas of the world, a significant change in policy objectives of the Organisation of the Petroleum Exporting Countries (OPEC), and appreciation of the US dollar.
"Although the relative strength of the forces driving the recent plunge in prices remains uncertain, supply-related factors appear to have played a dominant role," the GEP said.
The WB report said soft oil prices are expected to persist in 2015 and will be accompanied by significant real income shifts from oil-exporting to oil-importing countries.
"For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external, and fiscal pressures."
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Oil price declining trend to continue this year: WB
FE Report | Published: January 08, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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