Brunei Darussalam’s Centre for Strategic and Policy Studies (CSPS) said the country’s economy grew 2.8 per cent year-on-year (y-o-y) in second quarter (Q2) of this year. The nation’s think tank said this in its October update on Brunei’s economy.
CSPS said growth has been largely supported by the production of petrochemicals. The pandemic has hit travel and tourism hard. Brunei’s air transport and hotel sub-sectors contracted by more than 90 per cent and 50 per cent in Q2 while the restaurants sub-sector contracted by 20 per cent. On the other hand, the telecommunications sub-sector expanded by about three per cent.
CSPS said the global economy contracted in Q2 2020 as COVID-19 containment measures severely restricted labour supply and disrupted production. Output in the United States (US) plunged by a record 9.1 per cent y-o-y in Q2. By contrast, output in China rebounded swiftly, growing by 3.2 per cent.
After a turbulent March, financial conditions have improved. Major stock markets rallied, capital flows returned to emerging markets, and most regional currencies strengthened against the US dollar. Oil prices have recovered somewhat but remain two-thirds of their January levels.
CSPS also said since 1970, there have been six episodes of oil price collapses before COVID-19 struck. Brunei’s fiscal response has varied across the episodes, depending on the nature of the shocks. Fiscal spending was cut substantially during the 1985-86 and 2014-16 oil price crashes. By contrast, spending held steady during the 1997-98 Asian financial crisis and increased during the 2008-09 global financial crisis.
Meanwhile in its update on Brunei economy published in July this year, CSPS said the COVID-19 pandemic has severely disrupted global economic activity. The global economy in 2020 is projected to suffer the deepest recession since World War II, despite unprecedented policy support.
Pandemic containment measures, such as international travel bans and domestic lockdowns, while necessary to control disease spread, have brought global travel and tourism to a virtual halt.
Brunei has managed to control its COVID-19 outbreak by imposing containment measures early. This has, however, affected activity in several service sub-sectors. In first quarter (Q1), growth moderated to 2.4 per cent. Brunei’s growth in 2020 has been revised downwards to between one and two per cent.
On the impact of COVID-19 in Brunei using near real-time measures, CSPS said using Google search data as a proxy for consumer demand, the travel-related and consumer-facing service sectors in Brunei experienced steep contractions from mid-March to May when containment measures were most intense. Economic activity has gradually recovered since early June.