Azlan Othman
The Asean+3 Macroeconomic Research Office (AMRO) called on agencies in the Sultanate to expedite the implementation of foreign direct investment (FDI) projects in priority sectors, such as food, information and communications technology (ICT) and tourism.
The authorities’ proactive approach on climate change should also continue, supported by appropriate budget allocation. These are the policy recommendations AMRO made during an annual consultation visit to Brunei Darussalam from November 26 to 30, 2022.
AMRO added that fiscal incentives can also be considered, for enterprises participating in climate change adaptation and mitigation. In other areas, such as the labour market, and in doing business environment, it is encouraging to note that various initiatives have been put in place, to address long-standing structural challenges.
AMRO added that the strong oil and gas export receipts from high oil prices have helped to restore Brunei Darussalam’s fiscal position.
However, looking beyond the immediate terms of trade gains, continuing efforts to further diversify revenue sources would be desirable to shield the public finance against volatility and procyclicality.
The authorities should also continue to press ahead with expenditure reforms, thereby strengthening fiscal consolidation in order to anchor medium-term fiscal sustainability.
Since May 2022, monetary conditions have tightened, given the upward adjustments in the central bank’s standing facility deposit and lending rates.
AMRO believes that the adjustments – mirroring the developments in Singapore’s interest rate – are appropriate, given the peg to the Singapore dollar under the Currency Interchangeability Agreement. The framework continues to be beneficial to Brunei, helping to anchor macro-economic stability.
In the financial sector, given the increased volatility in global financial markets, AMRO said it would be prudent on the part of the authorities to strengthen the risk management framework for the monitoring of risks associated with banks’ lending activities and investment of excess liquidity abroad for higher returns.
“Further strengthening credit provision to the micro, small and medium enterprises (MSMEs) remain important to foster private sector growth and developments.
“While the economic diversification progress so far is commendable, there is room to expedite the implementation of FDI projects in priority sectors,” it said.
