The relaxation of restrictions on mass gathering and events was expected to lead to more sales in the hotels and restaurants sector (50.3). Better performance was also expected in agriculture, forestry, fisheries and livestock (50.3).
This was revealed in Brunei Darussalam Central Bank’s (BDCB) Brunei Darussalam’s Business Sentiment Index (BSI) published for May 2022 yesterday.
Other private services (49.9) showed pessimism in May 2022 with businesses citing expectations of lower productivity and activities due to public holidays with staff and clients taking vacation.
Meanwhile, oil and gas related (50.0); manufacturing (50.0); wholesale and retail trade (50.0); finance and insurance (50.0); and real estate and ownership of dwellings (50.0) reported similar sentiments regarding their business conditions in May 2022 compared to April 2022.
The index is based on surveys conducted on more than 500 micro, small, medium and large-sized businesses from 11 economic sectors in Brunei Darussalam, across all districts.
The monthly index is designed to measure the level of business confidence/sentiment in the country covering various aspects including current and future business conditions; investments; employment of workers; as well as costs of running the businesses. Therefore, BSI serves as a leading macroeconomic indicator with its forward-looking element.
The BSI and sub-indices can be interpreted as follows – a BSI value of above 50 represents expansion or optimism compared to the previous month; a BSI value of 50 represents similar or no change compared to the previous month; and a BSI value below 50 represents contraction or less optimism compared to the previous month.
There are nine sub-indices within the BSI. The current business conditions sub-index, which is the main headline index for the BSI, was 50.0 in May 2022.
This indicates that overall expectations regarding business conditions were similar to April 2022, with mixed sentiments among businesses being recorded during the month of May.
Some businesses were optimistic about increased orders/sales; projects and activities due to various factors such as further relaxation of restrictions (including re-opening of borders for air travel); resumption of some business operations; Hari Raya Aidilfitri celebration; and term break for schools.
Other businesses reported pessimism as they expected adverse effects from production disruptions reducing sale volumes; less revenue as more people travel out of the country; as well as lower productivity due to shorter working hours with long public holidays in the month of May 2022.
Looking ahead, businesses remained hopeful that business activities will pick up in June 2022 as indicated by the index for one month (1M) ahead, which was at 50.4.
The investment sub-index was 50.6 for the current month, 50.5 for 1M ahead and 50.4 for three months (3M) ahead. This indicates that, in general, businesses expected to increase their investment expenditures in May 2022.
Amongst the factors which were reported include being awarded new projects and increased business activities. A number of businesses planned to increase inventory; purchase raw materials, equipment, machinery, and company vehicles; and expand their premises. They also indicated plans to increase investment in the coming months.
The employment sub-Index was 50.1 for the current month and 50.2 for 1M ahead, indicating that businesses generally expected to hire more employees in May 2022.
Businesses will also continue to hire next month to replace workers who have resigned and those who have left the country. Nonetheless, manpower issues such as staff retention issues and difficulty in getting foreign employees remained challenging.
The costs sub-index was 49.9 for the current month and 50.2 for 1M ahead. Companies expected to face lower costs of running their businesses in May 2022 compared to the previous month, with the current month’s sub-index falling below the threshold for the first time since January 2021.
This was mainly attributed to companies in the oil and gas related sector experiencing lower production. However, businesses in other sectors expected a higher overall cost due to a rise in the costs of ingredients and raw materials; high logistics and transportation costs; additional salary expenses for new hires; and additional purchases of flight tickets for outgoing foreign employees.
These businesses expect prices to increase in June 2022 as supply shortages remain a concern.
In terms of economic sectors, five out of 11 sectors recorded optimism. The largest increase in sentiment was seen in transport and communications (50.9), driven by expectations of increased air travel with the easing of border restrictions.
In terms of the index by business size, medium (50.2) and large-sized (50.1) businesses reported optimism as they expected to record more sales and profits due to the festive season and from getting more projects.
Meanwhile, micro (50.0) and small-sized (50.0) businesses expected similar business conditions to last month.