Some companies have expressed the challenges they face when hiring local and foreign employees while a small number are reducing headcounts due to poor business performance.
According to Brunei Darussalam’s Business Sentiment Index (BSI) for July 2023 published yesterday by Brunei Darussalam Central Bank (BDCB), the employment sub-index was 50.3 for the current month, and 50.3 for 1M ahead. Continuing the trend from previous months, businesses generally expected to increase their employee headcount in July and August 2023. This is in line with new projects and expansion efforts.
The index is based on surveys conducted on almost 500 micro, small, medium, and large businesses from 11 economic sectors across all districts.
The monthly index is designed to measure the level of business confidence/sentiment covering various aspects including current and future business conditions; investments; employment of workers; as well as costs of running the businesses.
Therefore, the BSI serves as a leading macroeconomic indicator with its forward-looking element.
The BSI and sub-indices can be interpreted with expansion/ optimism compared to the previous month if the value is above 50; a value of 50 shows similar/no change compared to the previous month; and below 50 signifies contraction/less optimism compared to the previous month. There are nine sub-indices within the BSI. The main headline index, which is the Current Business Conditions sub-index, was 50.6 in July 2023.
This indicated that business conditions were more optimistic compared to June 2023, mainly driven by businesses expecting a pickup in activities and sales as a result of events associated with birthday celebrations of His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaulah ibni Al-Marhum Sultan Haji Omar ‘Ali Saifuddien Sa’adul Khairi Waddien, Sultan and Yang Di Pertuan of Brunei Darussalam in July.
Survey results also showed that some businesses were more optimistic with the award and commencement of new projects, while some expected resumption and increase in business activities after renovation and maintenance works carried out in previous months.
Looking ahead, the index for one month (IM) ahead stood at 50.4, indicating businesses expected to improve further in August 2023 compared to July 2023. Most of the optimism was attributed to the expected arrival of more inventories, new hirings as well as additional projects being awarded.
There were expectations that previous investments made to improve technology, procurement of new equipment and machinery, as well as efforts to hire and train employees would result in businesses being able to work at a higher capacity.
The investment sub-index was 49.9 for the current month, 50.1 for 1M ahead, and 50.1 for three months (3M) ahead. This indicates that, in general, businesses are expected to decrease their investment expenditure in July 2023 compared to June 2023, mainly because significant investments had already been made in previous months. However, looking ahead, several businesses expect to increase their level of capital expenditure slightly in the next few months, especially project-related investments.
Some businesses also planned to invest in various aspects such as upgrading IT systems, purchasing new machinery and equipment, renovating facilities, as well as increasing inventory to meet higher consumer demand.
The costs sub-index was 50.4 for the current month and 50.6 for 1M ahead. Companies generally expected the costs of running their businesses in July 2023 to be higher than the previous month. This was mainly linked to the businesses’ expectations that a pickup in business activities and projects would generally lead to an increase in operational costs.
Survey results also showed that businesses expected to incur higher salary costs as a result of previous hiring efforts as well as an increase in costs of carrying out major maintenance works. Many businesses in several industries also raised cost concerns over the impact of the revised customs import and excise duties on plastic products effective from May 17, 2023, in particular the manufacturing; wholesale and retail trade; and the agriculture, forestry, fisheries and livestock sectors.
In terms of economic sectors, four out of 11 sectors reported expectations of more optimistic business conditions in July 2023. The oil and gas related sector showed the highest optimism at 50.8, where businesses shared expectations of a pickup in production capacity after maintenance as well as better profit margins.
The transport and communications sector also reported optimism with the expectations of peak travel season being in July, whereas businesses in the finance and insurance sector also expected better market performance. Survey results similarly showed that the hotels and restaurants sector expected consumer spending within the country to pick up as a result of His Majesty’s birthday celebrations in July 2023.
On the contrary, two sectors that reported slightly pessimistic business conditions in July 2023 compared to the previous month were the agriculture, forestry, fisheries and livestock, and the wholesale and retail trade sectors. Businesses in these sectors cited the revision in customs import and excise duties on plastic products, and its impact on their overall costs and business performance as a concern. The other five sectors reported similar business conditions to the previous month.
In terms of the index by business size, businesses of micro and large size reported expectations of better business conditions in July 2023 compared to the previous month.
Generally, these businesses expected an increase in business activities due to new projects and higher demand for their products and services. Small businesses reported similar conditions to the previous month while medium-sized businesses faced slightly worse conditions than June 2023.