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Business sentiment improves following easing restrictions

Azlan Othman

Business conditions sub-index in the Sultanate has recorded an expansion over the past three months from October to December last year, according to Business Sentiment Index (BSI) published by Brunei Darussalam Central Bank (BDCB) yesterday.

The current business conditions sub-index, which is the main headline index for the BSI, was 50.3 in December 2021. This was the third expansion after the BSI recorded a contraction in September 2021 and this expansion was observed across different sectors compared to the previous month, BDCB said.

The second COVID-19 outbreak in early August 2021 has caused a lot of disruptions and brought various challenges and uncertainties to businesses.

The commencement of the Transition Phase on November 19, 2021 and the relaxation of certain measures where some businesses are allowed to resume operations, has brought about optimism in business conditions with the country recording an improved index of 50.4.

The Sultanate’s BSI for December 2021 is based on the surveys conducted on selected businesses of various sizes ranging from micro to large, from all economic sectors in Brunei in all four districts.

The monthly index is designed to measure the level of business confidence/sentiment in the country and cover various aspects of the businesses where the general questions cover current and future business conditions, current and future investments, current and future employment of workers, as well as current and future costs of running the businesses. BSI serves as a leading macroeconomic indicator with its forward-looking element.

If the BSI value is above 50, it is interpreted as expansion or optimism compared to the previous month. If the BSI value is 50, it means no change compared to the previous month while if the BSI value is below 50, there is contraction or less optimism compared to the previous month.

Within the BSI, there are nine sub-indices. BDCB also said the investment sub-index was 50.0 for the current month compared to 49.9 in November 2021. 50.3 for the month ahead and 50.6 for the next three months, indicating that businesses generally invested more in December 2021 compared to November 2021.

On the other hand, growth is also expected in investment expenditures in January 2022 and the three months ahead. Businesses cited they are expanding investments in hopes that the Endemic Phase will spur growth in projects and business activities.

The employment sub-index was 50.5 for the current month and 50.1 for the month ahead, indicating that businesses were hiring more employees in December 2021 and plan to continue to hire in January 2022.

Businesses cited high turnover rate in the private sector has increased the need to hire new staff, especially part-timers to support the increase in business activities in December 2021.

Similar to November 2021, businesses also highlighted the challenges in hiring foreign workers as they chose to return for good upon expiration of their contracts, while some businesses also highlighted the difficulty in hiring and retaining local workers to meet the
labour shortage.

The costs sub-index was 50.4 for the current month and 50.2 for the month ahead, indicating that businesses felt the increasing costs of running their businesses in December 2021 compared to November 2021 and expect operating costs to continue to increase in
January 2022.

The BDCB statement added, broadly speaking the reasons for the expected increase in business operating costs include the hiring of more workers in the coming months, paying year end staff bonuses, purchasing end-of-contract flight tickets for foreign employees, higher raw materials prices and shipping costs.

In terms of economic sectors compared to the previous month, some optimism was recorded in seven out of 11 sectors in December 2021 led by transport and communications, agriculture, forestry, fisheries and livestock, hotels and restaurants, finance and insurance, and health and education sectors.

Amongst reasons cited include increasing demand, higher vaccination rate within the population and expectation of more activities in the early Endemic Phase including dine-ins.

Slight pessimism was reported in the other private services sector as businesses slowed down towards the year end while the construction sector remained pessimistic with no
new projects.

The real estate and ownership of dwellings sector reported similar sentiment to November 2021 as they were still exposed to lingering uncertainties due to the pandemic. Nevertheless, December 2021 registered an overall improvement compared to the previous month where four sectors reported contraction or pessimism.

In terms of the index by business size, while micro businesses remained downbeat, owners of small and large-sized businesses viewed that their business conditions improved in December 2021 as the recent COVID-19 de-escalation plan has contributed to some growth with new projects and sales after contracting for several consecutive months previously.

Medium-sized businesses reported similar business conditions to the previous month.