Fitch Ratings: oil price shock would hit 2024 growth and boost inflation

YEREVAN, November 13. /ARKA/. Higher-than-expected oil prices in a scenario where the Middle East conflict disrupts oil supply would cause lower economic growth and higher inflation, Fitch Ratings says.

World GDP growth would be 0.4pp lower in 2024, but only 0.1pp lower in 2025, although the absence of a significant rebound suggests there could be a persistent moderate impact beyond the initial shock.

Fitch’s September Global Economic Outlook (GEO) assumes average oil prices of USD75 a barrel (bbl) and USD70/bbl in 2024 and 2025, respectively. Using simulations from the Oxford Economics Global Economic Model, it estimated the impact of higher oil prices throughout 2024-2025 on our baseline GEO growth and inflation forecasts.

Fitch's scenario assumes that, due to supply restrictions, oil prices average USD120/bbl in 2024 and USD100/bbl in 2025.
Higher oil prices would dampen GDP growth in almost all the GEO’s ‘Fitch 20’ economies, although the impact would largely dissipate in 2025. The absence of a significant growth rebound in 2025 implies a longer-lasting, if generally moderate, impact on GDP levels in most countries, which could affect assessments of potential growth.

The negative growth impact in 2024 relative to its September GEO forecasts ranges from 0.1pp in Indonesia to 0.9pp in Korea. The US, the eurozone and Japan see impacts of 0.5pp.

The largest impacts among the main emerging market countries would be in South Africa and Turkiye (0.7pp). Russia, and to a much lesser extent Brazil, would see a positive impact due to the important role of oil production in these economies. Using the aggregate impact on the Fitch 20, the global GDP growth shortfall would be 0.4pp in 2024 and 0.1pp in 2025 -0-