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Moody's: Oil exporters suffer biggest economic shortfall after commodity price declines.

Summary: The particularly large fall in GDP amongst oil exporters is accounted for

-- Economic developments for commodity exporters

after a fall in prices vary significantly depending on the type of

commodity, with oil exporters suffering the biggest shortfall in

activity, according to research by Moody's Investors Service.

Slowing demand from some regions, a weaker global growth outlook and

strong supply have dragged commodity prices down in recent months. In

this study, Moody's examined the path of commodity exporters' GDP in the

aftermath of commodity price falls. The analysis centres on four

commodities -- oil, copper, iron ore and cotton.

Moody's report entitled "Economic activity in the aftermath of commodity

price falls" is available through the links at the end of this press

release. The report is the part of a series of linked research on the

pattern and implications of declines in asset prices.

Commodity price movements can have important credit implications for

commodity exporters via lower export and fiscal revenues. Therefore large

falls in commodity prices have potential negative implications for

sovereigns' and other issuers' creditworthiness.

The results show that oil exporters experience the biggest shortfall in

economic activity."For oil exporters, GDP falls on average by around 7%

below the paths seen before the price falls," said Ruosha Li, analyst in

Moody's Macro Financial Analysis team. There were 4% and 2.5% shortfalls

for copper and iron ore exporters, respectively. However, for cotton

exporters, the GDP shortfall was small.

The particularly large fall in GDP amongst oil exporters is accounted for

by typically higher reliance on the commodity for these economies.

"Taking into account the different levels of exposure to commodities and

differences in the typical price fall, the average GDP shortfall is

smaller for oil than for copper and iron ore," Ms Li added. This likely

reflects typically large fiscal buffers for oil exporters that allow

policymakers to implement measures dampening the economic impact of the

price shock.

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Publication:EMBIN (Emerging Markets Business Information News)
Date:Feb 17, 2015
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