Brunei Darussalam’s GDP is projected to grow by 3.7 per cent this year driven by strong oil and gas production, according to the latest Asian Development Outlook, published by the Asian Development Bank (ADB) on Wednesday.
The ADB also forecast the sultanate’s economic growth at 2.8 per cent in 2025.
The report came days after International Monetary Fund (IMF) forecast
Brunei Darussalam’s economic growth to be about 2.4 per cent this year on the back of expected increase in oil and gas (O&G) production, including from the new offshore oil fields and rebound in downstream sector, while domestic non-O&G tradeable sector growth is expected to plateau.
ADB in its report said the strong Q4 2023 economic growth continued into Q1 2024, with GDP growing by 6.8 percent year-on-year. The uptick in economic activity was broad based. On the demand side, public investment grew the most in Q1 2024 (48 per cent), while private consumption contributed the most to overall growth (2.6 percentage points).
Energy developments
ADB also said developments in energy continue to underpin growth. The Salman oil field was commissioned in Q1 2024 with the oil and gas sector recovering strongly and steadily after contracting during the COVID-19 pandemic and the first three quarters of 2023.
Still, the most recent quarterly oil and gas gross value added figures remain 18 per cent below pre-pandemic levels. While some of this is due to depressed energy prices (especially of liquefied natural gas), it suggests there remains room for growth.
As projected in April, oil production recovered to 101,000 barrels per day by end-2023, returning to its 2019 level. However, natural gas production was 783,000 British thermal units per day in Q4 2023, still about 22 per cent lower than pre-pandemic production.
Expected trade and economic diversification complement the outlook for oil and gas. Expansions in investment and trade have boosted recent economic activity. Services growth continues to be strong, driven by trade, communications and business services.
Potential risks
The past year has seen the launch of the first container shipping link with China and ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (in mid-2023). The first export container of halal foods was shipped to Sabah, Malaysia, in March 2024.
ADB said growth forecasts are maintained considering the latest data, though the projections hold clear risks. While the high growth rate in Q1 is not sustainable for the rest of 2024 and 2025, continued investment in the country’s traditional growth sectors will support public investment.
Risks depend largely on external demand factors and global oil and gas markets. While geopolitical tensions pose downside risks through supply chain disruptions, expected strong energy demand in Asia in 2024 is a potential tailwind for trade and fiscal balances, which are expected to improve in 2024–2025.
The 2024 inflation forecast is adjusted downward due to consumer price trends through mid year, while the 2025 projection remains unchanged. Consumer prices deflated due to non-food items, particularly in transport, with year-to-date inflation at –0.3 per cent through June.
After high inflation during the COVID-19 pandemic, mild deflation appears to be returning as was common pre-pandemic. A base effect will likely restore some inflation later this year.
The Brunei dollar has continued to appreciate against major trading partner’s currencies since 2021 due to tightening by the Monetary Authority of Singapore. United States policy rate cuts in late 2024 would contribute to further appreciation and deflationary pressures.
Meanwhile regionally, ADB has raised its economic growth forecast for developing Asia and the Pacific this year, amid solid domestic demand and continued strength in exports. ADB has also lowered its forecast for regional inflation. – Azlan Othman
