Brunei Darussalam: Economy Recovering from Prolonged Downturn but Continued Structural Reform Needed to Bolster Resilience and Sustainable Growth

2018-10-05T02:52:42+00:00August 10, 2018|Press Release|

Brunei Darussalam: Economy Recovering from Prolonged Downturn but Continued Structural Reform Needed to Bolster Resilience and Sustainable Growth

SINGAPORE, August 10, 2018 – The Brunei Darussalam economy is expected to see a modest growth in 2017 supported by improvement in oil and gas production and expansion in investment, according to the 2017 Annual Consultation Report on Brunei Darussalam published by the ASEAN+3 Macroeconomic Research Office (AMRO). The report was prepared based on AMRO’s Annual Consultation Visit to Brunei Darussalam in October-November 2017 and data available up to December 31, 2017.

After four years of contraction, the economy grew by 1.3 percent in 2017 [1] and is expected to recover further in 2018. The gradual recovery in oil and gas production and the progress in infrastructure and FDI construction projects were the main drivers of economic recovery in 2017, and the growth is expected to accelerate to 1.6 percent in 2018. Inflation rate rose to -0.2 percent in 2017,  and is expected to increase further to 0.2 percent.

Authorities’ policy efforts to diversify the economy away from oil and gas sector and to attract more foreign direct investment (FDI) have started to show results. In particular, Brunei Darussalam has achieved a substantial improvement in the World Bank’s ease of doing business rankings, jumping from 101 in 2015 to 56 in 2018. The FAST (FDI Action and Support Centre) established in late 2015 to facilitate FDI has played an important role in improving business and investment environments to make the economy more attractive to foreign investors.

The external position remains strong reflecting its ample foreign reserves. The country’s trade balance continues to be in surplus, but it has been narrowing as the imports has been rising with the progress of major infrastructures and FDI construction projects. Going forward, exports are projected to rise with the modest recovery in oil production and prices while imports will increase further with the implementation of mega projects.

The fiscal position is expected to improve markedly in 2017 due to the authorities’ efforts to ensure fiscal sustainability and the recent recovery in energy prices. Revenue collection is expected to increase significantly, driven mainly by the recovery in oil and gas prices as well as production. With continued consolidation and efficiency enhancing measures, total expenditure is expected to decline further in 2017. As a result, fiscal deficit in 2017 is projected to narrow to 10.6 percent of GDP from 16.6 percent in 2016.

In terms of policy, priorities should continue to focus on the structural reforms to diversify and to broaden the economic base in order to bolster resilience and long-term sustainability. Given the relatively small size of its economy, Brunei Darussalam should continue its efforts to enhance global market access, including improvements in logistics, where the country is lagging behind. The authorities have made significant progress in containing budget deficit, but it is crucial to continue to enhance spending efficiency and rebalance budget allocation to support reform initiatives. The fiscal position can be further strengthened by diversifying revenue sources.

[1] This figure of 1.3 percent is higher than AMRO staff estimate of 0.6 percent during the consultation visit.   

About AMRO and AMRO Annual Consultation Report

ASEAN+3 Macroeconomic Research Office (AMRO) is an international organization established to contribute to securing the economic and financial stability of the ASEAN+3 region, which include 10 members of the Association of Southeast Asian Nations (ASEAN) and China; Hong Kong, China; Japan; and Korea. AMRO fulfils its mandate by conducting macroeconomic surveillance, supporting the implementation of the regional financial arrangements, the Chiang Mai Initiative Multilateralisation (CMIM), and providing technical assistance to the members.

The Annual Consultation Report was prepared in accordance with AMRO’s macroeconomic surveillance function. AMRO is committed to monitoring, analyzing and reporting to its members on their macroeconomic status and financial soundness. It also helps identify relevant risks and vulnerabilities, and assists members, if requested, in the timely formulation of policy recommendations to mitigate such risks.

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Huong Lan Vu
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