Macroeconomic effects of lower oil prices

The drop in oil prices could increase global growth by 0.4 pp in 2015-16. For advanced economies we expect a positive effect on growth in the US (0.3pp) and Europe (0.4pp), with a higher effect on Spain (0.7pp). For emerging countries, we expect no effect on Chinese growth as the positive impact will reduce the need for stimulus policies and the government will use this room for manoeuvre. In Latin America, there will be a positive impact on Chile, Peru and (less so) in Argentina, but a negative effect in Colombia. But the biggest economies in the region will see a negative effect, both in Mexico and Brazil. Note that, in any case, these results just include the effect of lower expected oil prices and associated policy responses. The forthcoming update on our macro forecasts would need to include also other relevant shocks seen since October.

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