巴黎银行-新兴市场-石油与天然气行业-新兴市场：评估油价的影响-20190709-8页_1mb

Emerging Markets: Assessing the Impact of Oil Prices

Core Content

This report analyses the impact of oil price volatility on emerging market (EM) economies, focusing on how oil prices influence fiscal balances, current account positions, and inflation. It highlights the varying degrees of exposure across different EM countries based on their reliance on oil production, consumption, and subsidies.

Key Messages

• Oil price volatility significantly affects EM economies, depending on whether they are net producers or net importers.
• GCC countries and Colombia are highly sensitive to oil price changes due to their reliance on oil revenues.
• Net oil importers with large current account deficits, such as India, South Africa, and Turkey, could benefit from lower oil prices.
• The weight of fuel in CPI baskets varies by country, with some like India, Poland, Turkey, and Brazil being particularly affected.
• Fiscal impact is significant for oil producers, while subsidy-dependent countries face rising costs when oil prices rise.
• Mexico and Indonesia use subsidies or tax measures to manage oil price shocks.
• External vulnerabilities are more pronounced in oil-dependent economies, with Colombia and Oman being notable examples.
• GCC countries are more vulnerable to oil price swings than other regions due to limited diversification.
• India could benefit from lower oil prices, reducing its current account deficit and potentially allowing for additional rate cuts.
• The oil price outlook for 2019 suggests a rebound, with Brent prices expected to average around USD71/barrel, peaking in Q3 at USD76/barrel.
• Geopolitical risks, such as US-Iran tensions, should be considered for the GCC.

Market Views

• The core bullish stance on EMs is maintained, with commodity exposure being a key differentiator.
• India is a major net importer and is particularly vulnerable due to its long INR positioning and external account gaps.
• Easy monetary conditions in developed markets are a key driver of EM outperformance.
• Russia is highlighted as a beneficiary of rising oil prices due to the short 5Y CDS position.
• Fiscal risks for oil producers are more pronounced when oil prices fall, especially for countries with high fiscal break-even points.

Inflation Impact

• Fuel inflation can significantly influence CPI in some EMs. For example:
  • Romania and Hungary: 8pp
  • India and the Philippines: 7pp
  • Indonesia, Russia, Poland, Turkey, and Brazil: 5-6pp
• In contrast, countries like China, Chile, the Czech Republic, and Taiwan have lower fuel weight in their CPI baskets, limiting CPI volatility.
• A surge in gasoline prices in 2018-2019 did not lead to significant headline CPI spikes in most EMs.
• Lower oil prices could make disinflation more challenging in countries like Argentina and Turkey.

Fiscal Impact

• Oil is a key revenue source for some EM governments, especially in MENA and GCC countries.
• The IMF forecasts a 4.7% GDP fiscal deficit for MENA countries, driven by GCC oil producers.
• Bahrain and Oman are particularly vulnerable to oil price drops, with Bahrain at risk of reversing fiscal gains.
• Saudi Arabia, UAE, Kuwait, and Qatar have central bank reserves and sovereign wealth funds that cushion them from oil price shocks.
• Mexico still relies heavily on oil revenues, with 18% of central government revenue coming from crude oil, despite a decline in its export share.
• Colombia depends on oil for its fiscal strategy to reduce debt ratios.

External Accounts Impact

• Net oil producers with large current account deficits, such as Colombia and Oman, are particularly vulnerable.
• Colombia saw its external gap narrow by 3pp, but it is expected to rise to 4.2% of GDP this year.
• Oman is an extreme case, with a current account deficit of 8% of GDP.
• Net importers like India, South Korea, and Thailand could benefit from lower oil prices, reducing external vulnerabilities.
• Subsidy-dependent countries like Mexico and Indonesia use measures such as tax exemptions or price freezes to manage oil price shocks.

Oil Price Outlook

• Brent prices are expected to rebound in 2019, averaging USD71/barrel and peaking at USD76/barrel in Q3.
• This is not expected to cause major concerns for most net importers, but GCC countries may face heightened risks due to geopolitical tensions.
• The report also warns about geopolitical risks in the context of oil price movements, especially for the GCC.

Important Disclosures

• This document is non-independent research and may be subject to conflicts of interest.
• It is intended for professional clients and is not investment advice.
• BNPP may engage in transactions that could conflict with the views expressed in the report.
• The information is based on public sources and may not be independently verified.
• Performance data may include back-testing and is not indicative of future results.
• The document is for marketing purposes and not for public offering in the US, Canada, or other jurisdictions.
• Options, ETFs, and other securities discussed may involve high risk and are not suitable for all investors.
• Restricted securities may only be purchased by qualified institutional buyers or non-US persons.

Summary

The report provides a detailed analysis of how oil price fluctuations affect emerging market economies, highlighting fiscal, inflationary, and external account impacts. It categorizes EM countries into three subgroups based on their exposure: major oil producers, net importers with current account deficits, and net importers with current account surpluses. The GCC and Colombia are most vulnerable to oil price drops, while India, South Korea, and Thailand could benefit from lower prices. The report also includes oil price forecasts and important disclosures regarding the non-independent nature of the research and legal restrictions on the use of the document.