Published in The Daily Star on Thursday, 26 February 2015.
Oil price fall: a boon for economy
Gazi Towhid Ahmed
The country can save up to $2 billion a year, thanks to the sliding oil prices in the global market, LankaBangla said in a recent research.
In 2014, the oil prices plunged 44 percent to $60.55 a barrel and the trend continued into 2015. Oil prices yesterday stood at $ 58.91 a barrel.
Since oil accounts for the largest share in the import basket (11 percent), the savings will be quite significant, which will go on to improve the trade balance — currently in the negative, the stockbroker said in the report titled Bangladesh Investment Guide 2015.
With the decline in energy cost, non-food inflation would be lower, which would, in turn, help in bringing down interest rates and subsequently boost investment.
Furthermore, the government will be able to eliminate fuel subsidy completely, which will help reduce budget deficit and foster proliferation of infrastructure.
“Overall, we expect the price fall of oil to improve economic conditions of Bangladesh.”
Meanwhile, Mustafizur Rahman, executive director of Centre for Policy Dialogue, said the oil-based power plants will be benefitted as well as the companies whose raw materials are dominated by oil.
Paint, packaging and plastic producing companies and food processors would be the beneficiaries of the fall in the crude oil price, said Mahfuzur Rahman, head of research at LankaBangla Securities, adding that the companies should see better gross margins.
However, the gross margin improvement will depend on the companies’ efficient inventory management and local price adjustment, he added.
The sharp fall in oil price will help cut the import cost of raw materials, said Rupali Chowdhury, managing director of Berger Paints Bangladesh, the market leader in the decorative paints segment.
She said the company profitability will increase in future.