Brunei Darussalam: Economy Recovering but Needs Support from Fiscal Policy and Structural Reforms
November 27, 2017 | Press Release
AMRO mission team meets with Brunei Darussalam Ministry of Finance (BMOF) officials. From left to right: Mr. Nizam Ismi, Director of Research and International Department; Dr. Hoe Ee Khor, AMRO Chief Economist; Dr. Hjh. May Faezah bte Haji Ahmad Ariffin, Deputy Permanent Secretary (Performance and Compliance); and Dr. Seung Hyun Hong, AMRO Lead Specialist.
SINGAPORE, November 27, 2017 – The Brunei Darussalam economy is expected to see a modest recovery in 2017 with a small positive growth led by improvement in oil and gas production and expansion in investment as infrastructure and FDI construction projects are progressing, according to the preliminary assessment by the ASEAN+3 Macroeconomic Research Office (AMRO) after its Annual Consultation Visit to the country from October 30 to November 3, 2017.
The mission was led by Dr. Seung Hyun Hong, AMRO Lead Specialist and participated by Dr. Hoe Ee Khor, AMRO Chief Economist. Discussions focused on growth prospects, structural vulnerabilities and policy developments, particularly those related to economic diversification.
”Brunei’s economy is recovering at 0.4 percent in 2017 after a prolonged period of negative growth” said Dr. Hong. “Fiscal policy should be supportive especially of the intensified government efforts to diversify the economy which have led to a significant improvement in business environment and progress in attracting FDI projects.” After four years of contractions, the economy has rebounded slightly in 2017 on the back of a recovery in oil and gas production and private investment. GDP growth has been improving slowly and turned positive in Q2 2017. This favorable growth momentum is expected to continue in 2018.
AMRO mission team meets with Managing Director of Autoriti Monetari Brunei Darussalam (AMBD). From left to right: Dr. Hoe Ee Khor, AMRO Chief Economist; Mr. Yusof bin Haji Abd Rahman, Managing Director of AMBD, and Dr. Seung Hyun Hong, AMRO Lead Specialist.
The fiscal position is expected to improve markedly in 2017 resulting from reforms undertaken by Authorities to ensure the long term fiscal sustainability and the recent recovery in energy prices. In order to strengthen fiscal support for sustainable economic growth and the diversification progress, continued efforts to enhance spending efficiency and to carefully rebalance public resource allocation will be crucial. Efforts to diversify revenue sources will also be important in order to reduce high reliance in oil and gas revenue.
Brunei’s trade balance remains in surplus, but narrowing as major infrastructures and FDI construction projects are progressing. Going forward, exports are projected to rise with the modest recovery in oil production and prices while imports will be boosted by implementation of some mega projects.
The financial sector remains well-capitalized with ample liquidity. Credit growth slowed down in recent quarters, reflecting sluggish economic activities, but should improve going forward.
The mission team would like to thank the Brunei Darussalam authorities for their continuous support to AMRO. The consultation visit has provided AMRO with valuable insight and deeper understanding of the Brunei Darussalam’s macroeconomic and financial conditions.