Asian growth to stay on track: UOB

Asian growth to stay on track: UOB

The growth currently under way in Asian economies is unlikely to be derailed unless oil prices stay above US$40 U.S. for more than three months, a study by bank economists said on Tuesday.

"Our rough estimate is that if crude oil prices average 35 U.S. dollars per barrel this year versus about $30 last year, Asia's growth is likely to be shaved by 0.5 and at most 1 percentage point," said the United Overseas Bank (UOB) team.

The International Monetary Fund has estimated that a 10 percent rise in oil prices will cut Asia's growth by 0.2 of a percentage point.

Unless geopolitical risks escalate, the UOB analysis said oil prices are expected to moderate in the $35 to $40 range.

Adjusted for inflation, the study said oil prices at $40 are still only about half the levels seen during the early 1980's oil shock.

Asia is regarded as particularly vulnerable to an oil price shock because of its reliance on imported oil and openness of its economies.

The huge current account surpluses in Asia should protect against the erosion of purchasing power, said the UOB study. The strong build-up of foreign reserves in recent years also provides a comfortable buffer for the trade balance.

"Barring a spike in oil prices to above $45 or a hard landing in the Chinese economy," Asia's growth is still expected to be rather strong this year, the study said. -- DPA