The World Bank has suggested that developing countries including Botswana can take advantage of collapse in oil prices to push their economic growth agendas.
Crude oil prices have been softening over the past months benefiting net importers and the benefits have already been extended to consumers as retail fuel prices were slashed towards Christmas.
According to the World Bank, soft oil prices are expected to persist in 2015 and will be accompanied by significant real income shifts from oil-exporting to oil-importing countries.
“For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external, and fiscal pressures,” it said.
The Botswana are paying 60 thebe less for petrol, farmers are enjoying themselves as prices for diesel 500ppm went down by 60 thebe per litre and retail prices for diesel 50ppm have gone down by 50 thebe per litre.
Director of Development Prospects at the World Bank, Ayhan Kose said in the latest edition of Global Economic Prospects that it as double sword at benefits importers, but detrimental to oil exporters.
“For policymakers in oil-importing developing countries, the fall in oil prices provides a window of opportunity to undertake fiscal policy and structural reforms as well as fund social programs,” Kose said.
“In oil-exporting countries, the sharp decline in oil prices is a reminder of significant vulnerabilities inherent in highly concentrated economic activity and the necessity to reinvigorate efforts to diversify over the medium and long term”.
The price of Brent crude oil has fallen below $50 a barrel for the first time since May 2009. According to BBC, many observers expect the price of oil to fall further as North American shale producers continue to supply increasing quantities of oil and gas, and the oil-producing group Opec resists calls for cuts in production to support prices.
According to Statistics Botswana, the preliminary Gross Domestic Product (GDP) estimates at current and constant prices for the third quarter of 2014 stood at P34 377.3 million compared to a revised level of P36 121.7 million registered in the second quarter of 2014.
The Real Gross Domestic Product (GDP) went up by 5.4 percent in the third quarter of 2014 compared to 6.9 percent accrued in the same quarter in 2013, according to data released in December.
The global trade expanded by less than 3.5 percent in 2012 and 2013, well below the pre-crisis average annual rate of 7 percent, holding back developing country growth in recent years, according to the World Bank.
The World Bank said the decline in oil prices reflects a confluence of factors, including several years of upward surprises in oil supply and downward surprises in demand, receding geopolitical risks in some areas of the world, a significant change in policy objectives of the Organization of the Petroleum Exporting Countries (OPEC), and appreciation of the U.S. dollar.
“The lower oil price has benefited consumers through a stable petrol price. The last time the government had to raise the retail prices of petrol, paraffin and illuminating paraffin was in 2012,” Tshephang Loeto an analyst at Investec said.