Effect of crude oil prices on growth os South East Asian economies

Abstract

The South East Asian economies are now classified as a part of the emerging markets and have been registering impressive growth rates since 2000. Some of these economies are predominantly manufacturing oriented and thus energy prices play a critical role in the sustenance of their growth rates. Growth of SE Asian Economies since 2000 -4 -2 0 2 4 6 8 10 12 2000 2001 2002 2003 2004 2005 2006 year yoy growth Hong Kong Malaysia Philllipines Singapore Thailand South Korea Figure 1: Growth trend of major economies in SE Asia With Indonesia also turning into a net importer of oil in 2002, a common concern across these economies is the resource dependence shown by them for the energy sources. Though the consumption pattern varies across different countries, the economies considered for the study are net oil importers. This may intuitively suggest that the growth in the region is susceptible to the changes in the energy prices. This is the starting point of our analysis of the economies that we study. Though the oil demand was sluggish until 2002 due to the Asian Economic crisis and the burst of the IT bubble, it has been growing steadily since then. At these high consumption levels, these countries have a much higher exposure to oil price volatility through factors like inflation and income transfer to oil-producing countries. All these have an adverse impact on the real growth rate of these economies.