WASHINGTON: A sustained period of higher oil prices would significantly affect developing economies but is unlikely to derail their strong recovery since the global financial crisis, a senior World Bank economist said on Monday.
Andrew Burns, the World Bank's manager of global economics, said a surge in the oil price could dent economic growth in developing countries by somewhere between 0.2 and 0.4 percentage points if it remained at higher levels for a year or longer.
"If prices remain high for a significant period of time, say a year, then you're looking at an impact on GDP that is significant and measurable, but which is unlikely to be large enough to derail the recovery in the growth we're observing in developing countries," Burns told Reuters in an interview.
The poverty fighting institution is closely monitoring the spike in oil prices because more expensive fuel, alongside current high food prices, will push more people into extreme poverty.
Burns said the rise in global oil prices by $15 to $20 a barrel since December was a concern but not a "calamitous event" for developing economies whose economies are growing at around 6 percent or more.
Oil prices surged to 2-1/2 year peaks last week after uprisings in the Middle East and Africa spread to Libya. The price fell on Monday by 34 cents to settle at $111.80 a barrel in volatile trading as pressure grew for Libyan leader Muammar Gaddafi to step down. [ID: nLDE71Q0MP]
"Assuming that the situation in the Middle East and North Africa doesn't escalate, then we should see these prices return to levels we were looking at in December," Burns said. "In that scenario it should have a relatively small impact."
If political uncertainty in the Middle East drags on, however, developing countries will start to feel the impact of costlier fuel, Burns added.?Reuters
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