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 Foreign Direct Investment (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 – 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 focussed on growth prospects, structural vulnerabilities and policy developments, particularly those related to economic diversification.
“Brunei’s economy is recovering at 0.4 per cent 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 favourable growth momentum is expected to continue in 2018.
The fiscal position is expected to improve markedly in 2017 re-sulting from reforms undertaken by authorities to ensure the long term fiscal sustainability and the recent recovery in energy prices. Continued efforts to enhance spending efficiency and to carefully rebalance public resource allocation will be crucial to strengthen fiscal support for sustainable economic growth and the diversification progress. Efforts to diversify revenue sources will also be important 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 see a boost with the implementation of some mega projects.
The financial sector remains well-capitalised with ample liquidity. Credit growth slowed down in recent quarters, reflecting sluggish economic activities, but should improve going forward.
The mission team thanked the Brunei’s authorities for their continuous support to AMRO. The consultation visit provided AMRO with valuable insight and deeper understanding of the Brunei Darussalam’s macroeconomic and financial conditions.