Brunei’s economic growth outlook remains strong

Azlan Ottoman

Brunei Darussalam’s economic growth outlook remains strong, but uncertainty is imminent. Despite the contraction in the first quarter, the Brunei economy is expected to grow moderately in 2021, reflecting widespread growth across the sector as external demand and domestic activity strengthen.

This was emphasized in Brunei Economic Update Published yesterday by the Center for Strategic Policy Research (CSPS).

CSPS is a major downside risk that another persistent wave of pandemics could impede global recovery and push down commodity prices, probably due to delayed deployment of new COVID-19 mutants or vaccines. I added that there is. Unexpected domestic oil and gas supply disruptions also pose a significant downside risk to the outlook.

CSPS also said global economic activity is accelerating, but recovery is uneven due to very unequal access to vaccines.

The number of COVID-19 cases has declined sharply in developed countries due to the rapid deployment of vaccines, but new infections are still increasing in many parts of the world. The spread of delta variants has clouded the outlook for the global economy.

World trade continues to grow strongly, with freight rates skyrocketing due to port congestion and a shortage of containers. Commodity prices have receded, partly due to slowing demand in China, and global financial conditions have been tightened by expectations of stronger growth and higher inflation.

The Brunei economy shrank 1.4% year-on-year in the first quarter, following a decline in the previous quarter, primarily due to lower oil, natural gas and liquefied natural gas (LNG) production. The services sector recorded modest growth in the first quarter after a fourth consecutive quarter of contraction.

Brunei’s trade balance returned to the black after strong exports of crude oil and other petroleum and chemical products in March and April, despite record-high imports of mineral fuels. Inflation settled at 1.1% year-on-year in April and May. Increased oil and tax revenues have reduced the budget deficit slightly.

According to CSPS, the Brunei economy fell 1.4% year-on-year in the first quarter of 2021 after a 1.4% decline in the previous quarter.

Negative growth in the first quarter was primarily due to reduced oil and gas mining (minus 3.1%), LNG production (minus 11.4%) and construction (minus 16.6%). Crude oil production fell from 116.3 tbpd in the first quarter of 2020 to 114.9 thousand barrels / day (tbpd), and LNG production fell from 1001.5 thousand mmbtu / d to 886.9 million British thermal units (mmbtu / d) over the same period. Has decreased to.

The decline in the upstream oil and gas sector was due to unexpected production turmoil, and the slump in construction was due to the limited availability of migrant workers and the shortage of raw materials amid border closures.

Meanwhile, strong growth was recorded in the downstream oil and gas sector, especially in oil and chemical manufacturing, as well as in agriculture, retail, restaurants, medical services and business services.

Brunei’s budget deficit was 20.3% of gross domestic product (GDP) in the first quarter (24 of GDP in the fourth quarter of 2020) against the backdrop of rising oil and gas revenues and tax revenues, despite rising spending. %) Slightly reduced.

NS Brunei Economic Update Is a supplement to Brunei’s economic outlook Published in January every year.