Brunei’s domestic economy grew by 2.6 per cent year-on-year in the first half of 2020 compared to 3.9 per cent for the whole of 2019, according to Autoriti Monetari Brunei Darussalam’s (AMBD) bi-annual policy statement for the second half of 2020.
In its Policy Statement 2/2020, the central bank stated that the inflation forecast for 2020 remains in the range of 1 to 2 per cent, with inflation in 2021 forecasted to be in the range of 0 to 1 per cent.
Moreover, the Oil and Gas sector contracted by 2.6 per cent y-o-y with declines in both oil and gas mining and manufacture of LNG by 1.9 per cent and 4.9 per cent y-o-y, respectively.
Meanwhile, the non-oil and gas sector rose 9.5 per cent y-o-y during the period driven by a jump in downstream activities by 594.7 per cent y-o-y with a new production of petroleum and chemical products, while other non-oil and gas activities contracted slightly by 2.8 per cent y-o-y.
“The latter was mainly due to weaknesses in the services sector, which had largely been negatively impacted by the COVID-19 outbreak and the subsequent imposition of various containment and preventive measures nationwide during the first half of 2020,” said AMBD.
The sharpest declines were seen in the Air Transport (-60.2 per cent), Land Transport (-21.6 per cent) and Hotels (-21.5 per cent) sub-sectors.
Looking ahead, it added, with the de-escalation measures rolled out in phases, some sectors are slowly returning to some form of new normal, while others will take a longer time to recover.
“The near-term domestic economic outlook will also depend on the performance of the oil and gas sector and the extent of further economic recoveries,” said the central bank.
Moreover, it also highlighted that the overall risk level of the banking sector for Q3 2020 was lower compared to Q2 2020.
The banking sector maintained high capital buffers, remained liquid with improved asset quality. However, this sector experienced a decline in profitability.
AMBD has also recently launched its first quarterly publication on retail lending rates offered by the banking sector on AMBD’s website.
As part of its continuous efforts to improve the supervision of the banking sector, the organisation has established the Domestic Systemically Important Bank (D-SIB) framework to identify the D-SIB(s) in the country.
“To further enhance risk-based supervisory approach in the insurance and takaful sector, AMBD has developed a risk-based capital and solvency framework,” it added.
With the imposition of travel restrictions to control the outbreak of COVID-19, the money-changing sector continued to be severely affected.
Following the interim measure introduced in April 2020, AMBD issued another Notice on Temporary Regulatory Relief Measure for Money-Changing Business on 15 October 2020 to provide a one-off reduction in annual licence fee to further ease the financial burden of this sector during this difficult period.
As part of the efforts towards the establishment of a securities exchange in Brunei, AMBD had issued an Exposure Draft of the Listing Rules to the relevant stakeholders at the end of September 2020.
It has also completed a consultation process for the proposed Notice on Requirements for Payment Systems to obtain feedback from stakeholders including prospective payment service providers (PSPs), banks, FinTech Regulatory Sandbox participants and telecommunication companies (Telcos).
The interim measure introduced by AMBD and the Brunei Association of Banks (BAB) in March 2020 to waive all local interbank transfer fees has led to over 90 per cent y-o-y increase and 59.9 per cent y-o-y increase in the utilisation of the Real-Time Gross Settlement (RTGS) system and Automated Clearing House (ACH) Direct Credit system respectively from April to September 2020.
“AMBD and BAB have agreed to extend the fee waiver for another six months from 1 October 2020 to 31 March 2021,” said the central bank.
AMBD continues to closely monitor the developments of COVID-19 pandemic and its impact on the financial sector.
As the effects of COVID-19 continue to be felt and further development remains uncertain, banks are encouraged to continue to provide necessary and timely support to those who still require assistance.
Besides efforts to enhance and streamline the prudential regulatory framework for the financial sector that is consistent with international standards and best practices, AMBD has also expanded its macro-prudential surveillance toolkit to mitigate the systemic risk of the financial sector in Brunei.
The full version of AMBD Policy Statement 2/2020 can be found on AMBD’s website (www.ambd.gov.bn). – Analisa Amu
The Bruneian | BANDAR SERI BEGAWAN