BANDAR SERI BEGAWAN
Brunei’s economic recovery went stronger than expected as authorities continue to launch wide-ranging reforms to adjust its economy to lower oil prices.
The International Monetary Fund (IMF) recently reported that Brunei’s GDP last year has rebounded to 1.3 per cent, supported by its oil and gas and non-oil and gas sectors.
“Higher liquefied natural gas (LNG) and methanol production drove oil and gas growth – more than offsetting lower oil production – while non-oil and gas growth was mainly underpinned by the ongoing downstream construction projects,” IMF said in its report.
The international funding body had also indicated Brunei’s economic recovery to be carried over into early 2018, and expected its growth momentum to continue to 2.3 per cent this year.
“Over the medium term, economic growth and macro-economic balances are expected to strengthen further,” IMF said.
The start of downstream production — including from the Hengyi refinery and Brunei Fertilizer Industries (BFI) — and stronger oil and gas activities will result in robust GDP growth and exports in 2019-2023, it added.
“Imports linked to Foreign Direct Investment (FDI) projects are likely to keep the current account at moderate surplus in 2018, but it is expected to increase from 2019 onward,” said the IMF.
“The fiscal position is also expected to recover over the medium term, but remains vulnerable to oil and gas price shocks. Inflation is expected to remain low but positive.
“Risks to the near-term outlook are broadly balanced, although substantial uncertainty surrounds oil and gas prices,” it added.
The decline in oil and gas prices, explained the IMF, has led to large budget deficits and narrower current account surpluses.
The report said such setting sparked a response from Bruneian authorities to launch reforms in 2015, aimed at ensuring long term fiscal sustainability and intergenerational equity, as well as to foster economic diversification by improving its business climate.
“These reforms have started to bear fruit, as growth has begun to rebound and inflation has returned to positive territory,” it added.
The IMF also highlighted Brunei’s progress in implementing fiscal consolidation, adjusting financial sector regulation, improving business climate, attracting FDIs, and supporting micro, small and medium enterprises (MSMEs).
“From 2016 to 2018, Brunei experienced the largest cumulative improvement in the World Bank Doing Business score, particularly with a remarkable improvement in access to credit.”
“Major FDI projects under way in the downstream sector — the Hengyi refinery and BFI — together with other FDI projects within other priority business clusters should contribute towards achieving the goals of more dynamic and sustainable economic growth under the Wawasan 2035 development plan,” it added.