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Business sentiment contracted last month, optimistic for September: Central bank

The Current Business Conditions sub-index, which is the main headline index for the Brunei Darussalam Business Sentiment Index (BSI), was 49.8 in August 2022, denoting the first contraction of the sub-index since September 2021, however the index for one month (1M) ahead stood at 50.4 indicating optimism.

This was revealed in the latest BSI published by Brunei Darussalam Central Bank (BDCB) for August 2022 yesterday.

The BSI and sub-indices can be interpreted as following: above 50 – optimism compared to the previous month; 50 – no change compared to the previous month; and below 50 – less optimism compared to the previous month.

The contraction in the Current Business Conditions sub-index for August was due to the private sector reporting less optimistic views, with businesses expecting lower sales and fewer activities.

Some companies attributed the decline to a seasonal slowdown, higher prices of raw materials, and the re-opening of land borders for non-essential travel. However, some sectors expected to benefit from the further relaxation of restrictions with more sales and projects.

Meanwhile, businesses were optimistic regarding September 2022 due to expectations of increases in production, sales and business activities especially with upcoming events and school holidays.

The Investment sub-index was 50.0 for the current month, 50.1 for 1M ahead and 50.7 for three months (3M) ahead.

This indicated that businesses expected to maintain their investment expenditures in August.

However, in the 1M to 3M ahead, some companies expressed positive expectations of higher investment expenditure such as for the purchase of equipment and materials for upcoming projects; expansion of premises; and stocking up of inventory for the year-end.

The Employment sub-index was 50.1 for the current month, and 50.1 for 1M ahead, indicating that businesses generally expected to hire more employees in August.

This was in anticipation of more projects and business activities in September, as well as to replace workers who have left.

Businesses also expected to continue hiring workers in September as companies are still experiencing worker shortages and challenges in local employee retention.

The Costs sub-index was 50.0 for the current month, and 50.3 for 1M ahead. This indicated that companies generally expected the costs of running their businesses to remain the same in August compared to the previous month.

However, businesses expected costs to increase in the next month, on the back of several factors such as raw materials and ingredients becoming more expensive; higher shipment costs; additional expenditure on maintenance; new projects; salary expenses for incoming workers; and repatriation costs for outgoing foreign employees.

Five out of 11 sectors recorded optimism in August.

The finance and insurance sector (50.5) showed the largest increase in optimism, as better performance was expected with further relaxation measures in place. The hotels and restaurant sector (50.2) also expected an improvement in their performance.

However, oil and gas related (49.7); construction (49.6); wholesale and retail trade (49.8); and other private services (49.7) sectors showed pessimism in August on expectations of fewer projects, and lower sales and margins.

The real estate and ownership of dwellings, and health and education sectors reported no change.

In terms of business size, only micro-sized businesses (50.1) reported optimism in August on expectations of improved overall business conditions due to more projects and demand in general.

Small, medium and large-sized businesses expected similar business conditions as last month.

The index is based on surveys conducted on more than 600 micro, small, medium and large-sized businesses from 11 economic sectors, across the Sultanate.

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