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The world economy

5

he world economy

was significantly impacted by

commodity market developments in 2016 and

oil market-related developments in particular.

During past oil price declines, it was relatively easy

to explain that lower oil prices were supportive to

the global economy. Consumers in advanced econo-

mies enjoyed greater spending ability and central

banks were able to lower interest rates to stimu-

late their economies. However, the GDP shortfall in

oil producing economies was usually only relative,

given the small size of these economies. Thus, on a

global level, their GDP shortfall was much less than

the positive impact on the GDP of larger oil consum-

ing nations. This time, however, it seemed that the

overall negative effect from the sharp decline in oil

prices outweighed benefits in the short term, with a

‘contagious’ effect taking place across many aspects

of the global economy.

With oil prices around 20% lower in 2016 com-

pared with 2015, output in oil producing economies

remained negatively impacted, and a continued

decline in capital expenditure (CAPEX) spending

weighed on global growth numbers. It is estimated

that low oil prices reduced global economic growth

by around 0.1 to 0.2 percentage points. Low prices

provided some income relief to households, but con-

sumer spending did not compensate for these nega-

tive effects. Even in the United States, the stimulating

The world economy

T

Note: Figures based on March 2016 Monthly Oil Market Report.

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