The World Bank has urged emerging economies to use the plunge in oil prices to reform “distorting” fuel subsidies, and warned that failure to shore up public finances could make them more vulnerable in a crisis.

In its twice-yearly Global Economic Prospects report, the bank said lower oil prices would boost world output by 0.5 per cent, while reducing inflation globally by between 0.4 and 0.9 percentage points in the medium term. Oil-importing emerging markets are predicted to make large gains from the drop in oil prices, as their output is more energy-intensive than many richer countries.

But the big drop in crude prices — oil benchmarks have plunged more than 50 per cent since June, with Brent crude trading at below $50 a barrel yesterday — is also an opportunity for governments to remove energy subsidies without hurting consumers, the bank said.