Brunei Darussalam Central Bank (BDCB) published Brunei Darussalam’s Business Sentiment Index (BSI) for the month of February recently. The index is based on surveys conducted on more than 550 micro, small, medium and large-sized businesses from the 11 economic sectors in the Sultanate, across all districts.
The monthly index is designed to measure the level of business confidence or sentiment in the country and covers various aspects including current and future business conditions; current and future investments; current and future employment of workers; as well as current and future costs of running the businesses. Therefore, BSI serves as a leading macroeconomic indicator due to its forward-looking element.
BSI above 50 can be interpreted as expansion or optimism compared to the previous month while 50 indicates similar or no change and below 50 means contraction or less optimism.
Within the BSI, there are nine sub-indices. The Current Business Conditions sub-Index, which is the main headline index for the BSI, was 50.1 in February. This was the fifth expansion since October 2021, albeit much smaller compared to January. Some of the reasons given include increased activities since the Early Endemic Phase, increased orders and new contracts awarded by the government, and more production and exports. However, with several public holidays in February, slowdown was reported by some businesses. Many businesses cited similar conditions to January with some concerns over the rising number of new COVID-19 cases in Brunei, which continue to hamper business operations. Among the reported consequences include shortage of workers due to quarantine orders (QOs), as well as increased costs of materials and reduced inventory. The index for the one month (1M) ahead business conditions was recorded at 50.3 which reflects that in general, businesses expressed optimism and improvement in sales and activities with the upcoming festive seasons and more production, subject to no additional restrictions being imposed and that the COVID-19 situation will improve.
The investment sub-index was 49.9 for the current month, 50.5 for one month ahead and 50.7 for three months (3M) ahead. This indicates that overall, businesses have reduced investment activities in February compared to the previous month. However, some businesses plan to increase investment expenditures in the coming months such as factory upgrades investing in better office facilities and systems: renovating existing and new business premises stocking up inventory, and purchasing new tools, equipment, machinery and company vehicles.
The employment sub-index was 50.1 for the current month and 50.2 for the month ahead, indicating that most businesses were hiring more employees in February, and will continue to hire in the next month. Businesses are still facing manpower challenges including the lack of local workers with the right skills; no-shows at interviews; losing local workers to the government sector and delays in bringing in foreign workers due to labour quota issues.
Given the high turnover of local employees, some businesses expressed preference for foreign workers to ensure the stability of their workforce to keep operations running smoothly.
The costs sub-index was 50.3 for the current month and 50.3 for the month ahead, indicating that businesses felt the rising costs of running their businesses in February compared to January and expect costs to further increase in March. In general, businesses cited the increase in prices of raw materials such as fertilisers and oil; higher cost of imports due to shipping and transportation costs; and higher operational costs due to additional employee-related expenses such as purchasing flight tickets for employees who have ended their contract, as well as purchase of antigen rapid test (ART) kits and sanitisers.
In terms of economic sectors, eight out of the 11 sectors recorded pessimism with indices below the threshold of 50, with the largest contraction in real estate and ownership of dwellings, followed by construction, and hotels and restaurants. The reasons cited for the lower performances observed by the businesses include the effect from a shorter month, as well as shorter operating hours and temporary closure of their businesses due to COVID-19 cases amongst employees. Optimism was recorded in only two sectors in February namely oil and gas related, and transport and communication. Finance and insurance sector reported similar current business conditions in February compared to January.
In terms of the index by business size, only micro-sized businesses, in general, are slightly optimistic in their current business conditions in February while most small businesses observed similar business conditions in February compared to January. The medium and large businesses generally reported a contraction mainly due to the adverse impact of the third wave of the COVID-19 pandemic on their sales and business operations.