WASHINGTON (Thomson Financial) - It has been 'surprising' how well developing as well as industrial nations' economies have held up under the threat of record oil prices, World Bank chief economist Francois Bourguignon said today.
'In the case of developing countries, the reason for this resilience was that other commodity prices have been rising as well,' said Bourguignon, speaking at a press conference as he prepares to leave the Bank's top economic job after four years.
While the price developing countries paid for imported oil was rising, so was the price they received for copper, coffee or other commodity exports - so overall their economies did not suffer.
That could change if global commodity prices begin falling behind energy prices, but that isn't likely.
'We may be optimistic for the future,' Bourguignon said, since it is demand from China and other rapidly growing economies which has been driving up the price of oil and all other commodities together.
High oil prices are one of the factors behind the rapid expansion of sovereign wealth funds(SWFs) and Borguignon said the funds could play a positive or negative role in economic development depending on how they are managed.
He said he was somewhat surprised at all the current attention to SWFs since they really are nothing new. Venezuela, for example, established one in the 1970s to invest its oil revenue. It had little economic benefit since the private sector was borrowing as much as the Venezuelan government was saving at the time. Norway, on the other hand, has a well-run SWF based on oil, he said.
SWFs could become a problem for economic development if 'they are manipulated to get political control' of entities in foreign countries.
That is the concern critics have raised about Chinese investments in Africa and it is the problem the G7 ministers on Friday proposed to fight with investment standards on transparency and accountability. dennis.moore@thomson.com dem/wash/ro COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.