Falling oil prices may be a "shot in the arm" for global demand, but if they are part of a broader deflationary pattern there is reason for concern, warns HSBC.
In its Q1 2015 Global Macroeconomics report, HSBC pointed out that for many economists lower oil prices are like "manna from heaven".
"By boosting real incomes in high-spending parts of the world, lower oil prices represent not only a redistribution of income from oil producers to oil consumers but also a shot in the arm for global demand," said the report.
"On this interpretation, the world economy is suddenly looking a lot better than it was in the early months of 2014," it said.
But such a view may be too sanguine, said HSBC.
If lower oil prices solely represent an increase in supply (thanks to higher US and Libya production) the impact to the global economy would be "unambiguously positive".
"If, on the other hand, falling oil prices are a sign of broader deflationary patterns, then there is more reason for concern," HSBC said.
"In our view, deflationary pressures were well-established long before oil and other commodity prices fell, suggesting that the world economy remains in relatively poor shape," said the report.
The biggest problem for the global economy as far as HSBC is concerned are the "still high" levels of debt.
"In the developed world, there are no real signs that deleveraging has helped reduce overall debt levels," HSBC said.
"At best – as in the US – lower levels of private debt have been offset by higher levels of public debt," it said.
Furthermore, monetary policy appears to be having limited traction on high debt levels, HSBC said.
"With interest rates at zero and after years in which central banks have pursued various forms of unconventional easing, there are very few signs of renewed credit growth: it’s increasingly difficult to ignore the echoes from Japan," the report said.