| Azlan Othman |
BRUNEI Darussalam’s economy will grow at 1.5 per cent this year and further to two per cent next year, the Asian Development Bank (ADB) said, citing rise in global oil prices and strengthening of major industrial economies.
“With a rise in global oil prices, the economy seems to have posted marginally positive growth in 2017, for the first time in five years. Growth should strengthen 1.5 per cent this year and two per cent next year. Inflation is likely to edge up but continue to be low and the current account will continue to post substantial though narrowing surpluses. Enhancing domestic competition is key to diversifying the economy,” the Manila-based bank said in its 2018 Asian Development Outlook (ADO) released yesterday.
Elaborating more on Brunei’s economic performance, ADB said the Sultanate’s GDP is estimated to have grown by 0.8 per cent in 2017, following four years of economic contraction. Last year’s turnaround to marginal growth was underpinned by increased government consumption and a recovery in fixed investment, it noted.
Government expenditure on consumption, which had declined by 6.5 per cent in 2016, rose by 10.2 per cent in the first nine months of last year over the same period a year earlier. It is likely to have kept up that pace in the last quarter as higher international oil prices boosted government revenues.
Data for the first three quarters of 2017 suggests that a recovery in investment is under way, with fixed investment growing by 11 per cent year-on-year. Even as higher oil prices boost export revenues, export volumes of goods and services continued to decline, dragging on GDP growth, ADB said.
On the Sultanate’s economic prospects, the bank said a favourable economic outlook for the major industrial economies and higher global oil prices this year and next should help Brunei Darussalam build on last year’s turnaround and post GDP growth at 1.5 per cent in 2018 and two per cent in 2019.
On the demand side, investment is expected to continue to recover and support growth in both years. Government and private consumption should expand modestly, supported by rising oil and gas revenues, higher lending to households and a better business environment.
The ADO report said that industry is likely to accelerate from marginally positive growth last year to 1.9 per cent this year and 2.5 per cent next. Within industry, gas output could rise, though crude oil output will remain constrained by commitments to internationally agreed production cuts. Meanwhile, industry other than oil and gas will continue to develop.
A margarine plant began operation late last year, for example, and is expected to earn export receipts. Construction will continue to support growth. Dredging, jetting construction and installation works are well under way at the planned oil refinery and aromatics cracker plant on Pulau Muara Besar. Several road and bridge projects linking the capital to outer districts are also under construction and due for completion this year and next.
Construction of an ammonia and urea plant continues, with production expected by 2021. Service sector output is forecast to maintain growth this year as much as last year before inching up to 1.3 per cent in 2019. In recent years, a lack of domestic competition in the private sector has emerged as a constraint on the government’s efforts to encourage investment away from petroleum, and thereby diversify the economy.
This is one observation that underscores the need for a sound policy on domestic competition, and importantly, its vigorous implementation. Brunei Darussalam has moved up in the World Bank Doing Business ranking of 190 economies – from 72 in 2017 to 56 in 2018.
Similarly, Brunei Darussalam’s ranking in the Global Competitiveness Report 2017–2018 of the World Economic Forum improved to 46 out of 137 economies – from 58 out of 138 the previous year.
It ranks 104 in terms of the intensity of local competition, 102 in the extent of market dominance, and 89 in having an effective anti-monopoly policy.
Meanwhile, on regional front, ADB raised its 2018 economic growth estimate for developing Asia to six per cent from 5.8 per cent, citing solid export demand, but said US protectionist measures and any retaliation against them could undermine trade.
Growth in developing Asia would only ease slightly to 5.9 per cent in 2019. Strong external and domestic demand helped economies in the region expand by an average 6.1 per cent last year.
Though protectionist trade measures by the US so far this year have yet to dent trade flows to and from Asia, the risks are there, the bank said.
“Further actions and retaliation against them could undermine the business and consumer optimism that underlies the regional outlook,” it noted.
ADB also said Southeast Asia continues to benefit from the rise in global trade and the pickup in commodity prices. The sub-region is expected to maintain its 2017 growth rate of 5.2 per cent in both 2018 and 2019. Strong investment and domestic consumption will accelerate growth in Indonesia, the Philippines and Thailand, while an expansion in its industrial base will boost Vietnam, the ADO report said.