Lower Oil Prices Not to Boost Global Economic Growth – Moody’s

Moody’s Investors Service predicts that low oil prices over the next couple of years will not boost the global economy due to economic instability in the European Union, China, Russia and Japan.

Global credit rating agency Moody’s Investors Service announced that low oil prices in the next two years will not benefit the global economy, according to the agency’s report published on Wednesday.

The ratings agency said that any potential boost from cheaper oil prices will be offset by the eurozone’s economic crises, as well as economic instability in China, Russia and Japan.

In theory, lower oil prices should give a boost to global growth, said Marie Diron, senior vice president at Moody’s.

“In the euro area, the fall in oil prices takes place in an unfavorable economic climate, with high unemployment, low or negative inflation and resurgent political uncertainty in some countries.” – Diron added, as quoted by the Financial Times.

Moody’s has forecast that the price of oil will stay around $55 a barrel throughout 2015, increasing to $65 a barrel in 2016.

According to Moody’s low oil prices will be a bad news for large oil-exporting countries, such as Russia and Saudi Arabia. The ratings agency predicts that recession in Russia is expected to last until 2017. Saudi Arabia, meanwhile, will dig deep into its cash reserves and increase its budget spending to try to maintain positive economic growth.