HSBC: Lower oil prices unlikely to revive demand in Asia

Monday, Jan 18, 2016,15:40 IST By Metrovaartha A A A

New Delhi | A significant decline in crude oil prices is unlikely to result in a swift bounce in demand conditions in Asian economies including India, says an HSBC report. According to the global financial services major, tumbling crude prices are not going to be a quick fix for Asia’s growth malaise.

Most Asian economies import crude oil and a lower purchase bill should therefore give a boost to the spending power of consumers, governments and companies, but it ain’t as easy as that, the HSBC Research report said.

According to HSBC, falling prices for raw materials, including oil, partly reflects cooling demand in Asia, secondly, there is an income shift under way and its hurting Asia, at least in the short-term.

Moreover, crude importers such as advanced economies are preferring to, save their savings, rather than splurge, leaving the world short of demand, it noted. The report said growth across the Asian region would be a lot lower if crude was still above USD 100 per barrel.

If underlying growth is even weaker than currently reported, we might see activity sag further once the cushion from the fall in oil prices fades, HSBC Co-head of Asia Economics Research Frederic Neumann said.

Lower crude oil prices should in principle be a boost to a region that for the most part imports oil, but that is not happening and growth has decelerated virtually everywhere alongside the decline in oil prices.

Tumbling crude prices are not going to be a quick fix for Asia’s growth malaise rather, they are part of the symptom, Neumann said adding that a bounce in Asian demand thus appears unlikely on the account of oil.

Looks like we’ll be stuck in a slow grind for a while, Neumann said. Meanwhile, the Indian government recently lowered its economic growth forecast for 2015-16 to 7-7.5 per cent from 8.1-8.5 per cent.

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