14:12 | 29/09/2015 Global Economy
The International Monetary Fund has warned that commodity exporting countries like Australia face a further economic slowdown over the next two years if commodity prices keep falling.
Australia is being hit by slumping iron ore, coal and LNG prices
A new study by the IMF has found that the weak outlook for energy and metals prices could dramatically cut growth in countries dependent on commodity exports over the next few years.
The IMF has warned that lower commodity prices could trim as much as 1 percentage point off economic growth from 2015 to 2017 compared to 2012-2014.
That could see the Australian economy come to a standstill as it dramatically increases its LNG exports to become one of the world's biggest gas exporters.
Lead author, the IMF's research department deputy pision chief Oya Celasun, noted in the report that the slowdown was not just a cyclical event, but was structural as well because resources investment had fallen and was likely to fall further due to lower commodity prices.
The IMF study looked at data from more than 40 commodity exporters over the last 50 years.
The report found that government spending in commodity exporters tends to rise when the terms of trade (the difference between export and import prices) is improving and borrowing is easier for governments, companies and households.
The IMF said that link amplifies the impact of commodity prices on commodity exporting economies.
But it said that a typical commodity exporter was in a better position to deal with the downswing in prices than in the past especially if their currency had depreciated./.