Oil price spike could shave advanced economies' growth

AFP , Tuesday 22 Mar 2011

Study predicts 'modest impact on activity' if oil remains high

The recent spike in oil prices could shave half a percentage point off growth of the world's advanced economies by 2012, according to a study by the Organisation for Economic Cooperation and Development.

"The recent oil price hikes may have a modest impact on activity in the near term," said the study entitled The Effects of Oil Price Hikes on Economic Activity and Inflation. "...if the US$25 increase in the price of oil that has taken place since the Tunisian uprising were to be sustained, activity could be reduced by about 0.5 percentage points in the OECD area by 2012 and inflation could rise by 0.75 percentage points," it added.

In its previous forecasts published in November, the Paris-based policy and research body for governments of 34 leading economies forecast 2.3 per cent growth for the OECD area this year and 2.8 per cent in 2012.

"At currently low levels of inflation and expectations, monetary policy may not need to react to the recent oil price hikes," added the study.

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