The ASEAN+3 Macroeconomic Research Office (AMRO) expects Brunei Darussalam’s gross domestic product (GDP) to be 1.6 per cent this year (2020) and 3.1 per cent in 2021, according to their September forecast, which is similar to their August projection.
“The region (ASEAN+3) has been severely affected by containment measures caused by COVID-19 pandemic, and growth is forecast to decline by 0.3 per cent in 2020. Nine of our 14 members are expected to contract this year, some very significantly,” AMRO said.
ASEAN+3 is composed of the Southeast Asian nations plus China including Hong Kong, Japan and Korea. For ASEAN alone, AMRO forecasts its GDP to contract by 3.3 per cent this year and recover by six per cent in 2021.
“We are projecting a strong V-shaped recovery in GDP growth in 2021, particularly for the Plus-3,” AMRO said. “The region as a whole is projected to expand at 6.7 per cent, with all economies forecast to return to positive growth—predicated on the effective containment of the pandemic, both regionally and globally, and on the assumption that exits from policy measures proceed smoothly.”
In AMRO’s Annual Consultation Report on Brunei Darussalam published last month, it said that, following a recovery in 2019, the Bruneian economy is expected to continue to register positive growth in 2020, supported by the full operation of Hengyi’s refinery production.
Recent progress in diversification and the commencement of large projects have improved employment prospects, GDP growth, and external trade. However, the improvement could be jeopardised by a slowdown in structural reforms and economic diversifications. In addition, a slowdown in the key foreign direct investment (FDI) source countries can reduce the flow of new investment projects.
Furthermore, a high reliance on foreign workers to operate FDI projects can pose a vulnerability to the economy if the labour supply is disrupted.
AMRO added that, despite considerable progress in diversification, the reliance on the oil and gas sector remains high. Continued diversification is important to continue improving the doing business environment and in order to provide more employment opportunities, increase non-oil and gas fiscal revenue, boost economic resilience, and ensure long- term sustainability.
Moreover, AMRO noted that the authorities have implemented various initiatives to address labour issues, such as the i-Ready Apprenticeship Programme, i-Usahawan, and the Centre for Capacity Building. However, these initiatives will require time to become successful and achieve better results, and must therefore be continued. At the same time, the authorities continue to look for new ways to improve the skills and qualifications of Brunei’s labour force, such as through placements in international institutions or companies outside the country.
AMRO also said the authorities have made substantial progress in reducing the budget deficit in the recent years to ensure long-term fiscal sustainability. Further diversifying revenue sources away from the oil and gas sector, increasing revenue collection and expanding the tax base will support fiscal consolidation and help reduce the high reliance on oil and gas revenue.
On the expenditure side, measures should focus on enhancing spending efficiency, containing current expenditure and reducing subsidies under the current low inflation environment. In light of the negative impact of the coronavirus outbreak on the economy, the government should continue prioritise fiscal spending to support certain sectors such as manufacturing, trade and tourism.
In the near term, measures to improve access to credit – particularly for small and medium enterprises (SMEs) – under prudent guidelines, will support diversification and economic growth. In the medium to long term, developing new financial products, including digital payments systems and financial technology platforms, will enhance investment opportunities and financial market developments. In addition, these will provide SMEs with an easier access to global online markets.
The Department of Economic Planning and Statistics (DEPS) said last week that Brunei Darussalam’s GDP recorded a positive growth of 2.8 per cent year-on-year in second quarter 2020 and 2.4 percent for first quarter 2020.
Meanwhile, according to a report recently released by the Asian Development Bank (ADB) in its Asian Development Outlook (ADO) for September, Brunei’s GDP growth is forecast at 1.4 per cent.
The forecast is similar to what the ADB has projected in June this year. ADB also forecast the sultanate’s economic growth at three per cent next year.