new economy

　　

According to the Asian Development Bank's (ADB) April 2024 Asian Development Outlook, Brunei Darussalam's economic growth is expected to be 3.7% this year and 2.8% next year (2025). The report comes a week after the ASEAN +3 Macroeconomic Research Office (AMRO) released its annual flagship report, The ASEAN +3 Regional Economic Outlook 2024, which forecasts Oman's economic growth at 2.7 percent this year and 2.9 percent in 2025.

The ADB reported that Brunei's economic growth will accelerate in 2024, partly due to a pick-up starting in the second half of 2023. A rebound in the services sector has underpinned the economic recovery over the past three years, but the outlook for the next two depends on a recovery in the oil and gas (O&G) sector. Headline inflation has been subdued recently, but food prices remain high. Fiscal consolidation and revenue diversification are needed in the medium term to ensure fiscal fairness.

Brunei's economy grew strongly in the fourth quarter of 2023, the report said. Long-depressed oil and gas continued to support growth. While there were signs the sector recorded its first growth in the past three years, supply-side data pointed to a slowdown in consumption, with the private sector driving 6.8 per cent growth in gross domestic product.

At the same time, growth in the services sector, which had been strong since the second half of 2022, slowed. This is due to the normalisation of food and beverage services, which saw exceptionally strong sales growth in the second half of 2022 and the first half of 2023.

On the demand side, private consumption in the Sultanate continues to support growth. Despite supply-side data showing signs of slowing consumption, demand-side private consumption grew 4.8 per cent in the fourth quarter. Fixed investment, by contrast, continued to decline. Weak domestic demand dragged down imports of machinery and transportation equipment, which fell 8.3 percent and contributed to the fourth consecutive quarter of GDP growth.

However, exports continued to decline for the fourth consecutive quarter as exports of minerals, including oil and gas, fell compared with the same period last year.

Growth is expected to accelerate to 3.7% in 2024. As the economy continues to recover from the effects of COVID-19, growth is expected to be stronger than historical trends. Previous deferrals in the oil and gas sector will increase fixed investment over the forecast period. Oil production is expected to recover from 89,000 BPD to 95,000 BPD, supported by the replacement of production equipment and the commissioning of the Salman field. LNG production is expected to recover from 678 billion British thermal units (BTU) per day to more than 700 BTU per day. A recovery in oil and gas production will boost growth through increased exports. With production expected to return to normal in 2024, growth will slow to 2.8% in 2025.

The report also said that Brunei's Vision 2035 plan will continue to diversify its economy. The sultanate's longstanding efforts to diversify its economy saw some progress in 2023.

In terms of agricultural exports, with a reliable halal certification system, the country has signed a halal food trade facilitation agreement with Sabah, Malaysia. In addition, the country exported its first batch of local food products to Singapore in September. Brunei is also investing to take advantage of its proximity to many offshore oil fields and turn it into a ship dismantling and repair centre.

The demand for maintenance and disposal of related facilities in Southeast Asia is expected to grow in the coming years. Investment in the Great Morra shipyard through a public-private partnership began in 2022 and is expected to be completed in 2025. If successful, the integrated storage yard project is expected to bring more employment and income opportunities, the report said. This should help reduce the oil and gas sector's share of GDP, which is currently about 50 per cent.

Growth prospects depend largely on a recovery in oil and gas production. Risks are skewed to the downside. Limited private investment in maintenance and renewal in previous years could reduce the operating rate of production facilities, thereby reducing the future output of the oil and gas industry.

The government recognises that heightened geopolitical tensions pose a downside risk to economic growth and an upside risk to inflation, as it could depress oil prices due to weak global demand and increase production costs due to supply chain disruptions. However, the rise in international energy prices, if more sustained than currently expected, will be a driving force for the country's trade and fiscal balance over the forecast period.