IMF lowers Brunei’s GDP growth to 1.3 per cent this year

Azlan Othman

Brunei Darussalam’s gross domestic product (GDP) growth is projected to be 1.3 per cent this year and 3.5 per cent next year, the International Monetary Fund (IMF) highlighted last Tuesday, in its first World Economic Outlook report since the pandemic shut major economies.

In its earlier forecast in October last year, IMF said for 2020, it has projected the country’s GDP growth at 4.7 per cent, taking into account the first production of the downstream oil and gas industry for the Oil and Petrochemical Plant Project in Pulau Muara Besar (PMB) as well the construction of Brunei Fertilizer Industries (BFI) plant.

IMF earlier forecast the GDP growth to be 3.6 per cent for next year. The IMF stated the COVID-19 pandemic is inflicting high and rising human costs worldwide, while the protection measures are impacting economic activities.

As a result of the pandemic, the global economy is projected to contract sharply by -3 per cent in 2020, much worse than during the 2008-09 financial crisis.

In a baseline scenario – which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 per cent in 2021 as economic activity normalises, helped by policy support, the IMF added.

The IMF warned that the COVID-19 impact will cause the world economy to experience the worst downturn since the Great Depression of the 1930s.

The risks for even more severe outcomes, however, are substantial. Effective policies are essential to forestall the possibility of worse outcomes, and the necessary measures to reduce contagion and protect lives are an important investment in long-term human and economic health.

Because the economic fallout is acute in specific sectors, policymakers will need to implement substantial targetted fiscal, monetary, and financial market measures to support affected households and businesses domestically.

Internationally, strong multi-lateral cooperation is essential to overcome the effects of the pandemic, including to help financially constrained countries facing twin health and funding shocks, and for channelling aid to countries with weak healthcare systems.

IMF added that the Asean +5 economies (Indonesia, Malaysia, the Philippines, Thailand and Vietnam) are forecast to be 1.1 per cent this year and six per cent next year.

On the oil price, the IMF said based on futures market pricing at the end of March 2020, the average petroleum spot prices per barrel are estimated at USD35.60 in 2020 and USD37.90 in 2021.

For the years thereafter, oil futures curves show that prices are expected to increase toward USD45 but stay below their average 2019 level (USD61.40).

Oil prices declined 7.3 per cent between August 2019 and February 2020, falling from USD57.60 to USD53.40, before further declining by 39.6 per cent in March to USD32.30 as the COVID-19 outbreak abruptly reversed a positive trend as containment measures directly hit the transportation sector, which accounts for more than 60 per cent of oil demand.

Confronting a weak demand environment, the OPEC+ coalition broke down on March 6, 2020, leading to the worst one-day price drop in the oil market since 1991.

After trading close to USD20 toward the end of March, oil prices recovered somewhat in early April as the OPEC+ coalition resumed talks.

The Asian Development Outlook (ADO) 2020, the Asian Development Bank’s (ADB) annual flagship economic publication, released recently said Brunei Darussalam’s gross domestic product (GDP) growth is forecast to continue to grow above trend, albeit at a slower pace at two per cent this year, before picking up to three per cent next year (2021).