The slump in oil prices is unlikely to boost the world economy until interest rates start to rise — by which time the commodity may have recovered somewhat anyway, the International Monetary Fund (IMF) said on Thursday.
The fund and many economists had believed that the 65 percent collapse in oil prices would be a net positive for the world economy, with gains to commodity-importing countries offsetting exporters' losses. However, the positive impact on consumption in advanced oil-importing economies such as the euro zone has been less than forecast.
"The widely anticipated 'shot in the arm' for the global economy has yet to materialize. We argue that, paradoxically, global benefits from low prices will likely appear only after prices have recovered somewhat and advanced economies have made more progress surmounting the current low interest rate environment," Maurice Obstfeld, Gian Maria Milesi-Ferretti and Rabah Arezki said in an IMF blog post.