Global economic jitters: Fitch Ratings predicts 2024 impact from soaring oil price
Fitch Ratings predicts that higher-than-expected oil prices, stemming from potential disruptions in the Middle East's oil supply due to conflicts, could significantly impact global economic growth and lead to a surge in inflation.
According to Fitch's Global Economic Outlook (GEO), a scenario with average oil prices of USD 75 per barrel in 2024 and USD 70 per barrel in 2025 could be upended if oil prices spike to USD 120 per barrel in 2024 and USD 100 per barrel in 2025 due to supply restrictions.
The simulations, conducted using the Oxford Economics Global Economic Model, reveal a potential 0.4 percentage point (pp) reduction in world Gross domestic product (GDP) growth in 2024, with a lingering 0.1 pp lower growth in 2025.
Despite the modest rebound anticipated in 2025, Fitch suggests a persistent moderate impact beyond the initial shock.
The impact of higher oil prices would be felt across the board, with the absence of significant growth rebound in 2025 indicating a potentially longer-lasting effect on GDP levels in most countries.
Notably, the negative growth impact in 2024 ranges from 0.1 pp in Indonesia to a substantial 0.9 pp in Korea, with the US, the Eurozone and Japan experiencing impacts of 0.5 pp.
Emerging market countries like South Africa and Turkey would face significant impacts of 0.7 pp, while Russia and Brazil, owing to their reliance on oil production, would experience varied effects.
The aggregate impact on the Fitch 20 suggests a global GDP growth shortfall of 0.4 pp in 2024 and 0.1 pp in 2025.
Moreover, higher oil prices would lead to elevated inflation rates in 2024, with India, Turkey, and Poland experiencing the highest percentage point rises.
Developed economies would witness more
