The Role of Food and Energy Market Structure, Political Risk and Macroeconomic Factors within BRICS in Forecasting Palm Oil Demand
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Cluster Research Grant, 2020
Abstract
The uncertainties on the palm oil demand from existing importing countries have trigerred effort by the Government to explore new markets for palm oil. Among the factors to be considered for the selection of these markets include high population and strong economy that could directly boost demand for cooking oil and other palm-oil based products. For instance, Africa is the world’s second most populous continent with over 1.3 billion people and with some of the countries exhibit rapid economic growth, thus Malaysian palm oil exporters could consider tapping into this market. Meanwhile, the formation of five newly emerging economies collectively known as BRICS (Brazil, Russia, India, China and South Africa) in 2010 have caught the scholarly attention of economists and development specialists, owing to the prospect of a unified geopolitical bloc and international trade development with a new set of ideas and values. The BRICS appeared likely to become the largest global economic group by the middle of this century and the role of this group in global affairs continues to gain momentum. The combined economic output last year of BRICS almost matched the gross domestic product of the USA. Jim O’Neill, the former Goldman Sachs Group Inc. chief economist said that led by China and India, the collective weight in global GDP of these countries continues to rise and therefore also does their importance.
Such strength coupled with big population collectively becomes a big market for food and energy which are the products of the palm oil. Hence, this study attempts to examine the role of food and energy market structure together with the political and macroeconomic factors in attracting demand for palm oil in BRICS (Brazil, Russia, India, China & South Africa) economy. The study uses panel data for a period of seven years (2012-2019).
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