Surprise! Developing Asian Countries Less Vulnerable To Oil Prices Than Developed Countries

Global economies are bearing the brunt of current civil unrest in the Middle East and North Africa that is pushing oil prices higher. Surprisingly though, Asian countries that are notoriously inefficient in their energy use and have an oil dependency rate that is 55% higher than that of a developed economy, are less vulnerable to price changes according to Societe Generale analyst Joseph Lau.

Higher GDP growth rates in Asia-Pacific, 7.1% compared to 2.2% in developed countries, hedges them from price changes, according to Lau. He calculates that Asian GDP growth would decelerate by 8.5% on a $10 increase in oil prices while it would cause advanced economies GDP growth to slow by 17.7%.

In addition most Asian countries have healthy current account balances though India’s current account deficit poses a problem.

The chart below shows that “oil hogs” like Singapore, Taiwan, Korea, Thailand and India are the Asian countries most sensitive to price changes.

oil price change chart

Photo: Societe Generale

The real concern for these countries however is the impact on inflation. Energy averages 9.3% of Asian CPI baskets and also influences CPI more insidiously through its effect on food prices and non-durable or durable goods.

Energy CPI chart

Photo: Societe Generale

Now, here are 12 Countries Whose Economies Will Get Wrecked In An Oil Spike >

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