Businesses were generally more optimistic about their performance in February 2023 compared to January 2023. This optimism was mainly driven by expectations of higher production due to higher demand; more incoming projects; commencement of new projects; as well as the 39th National Day.
This was revealed in the latest Brunei Darussalam’s Business Sentiment Index (BSI) for the month of January 2023 published by the Brunei Darussalam Central Bank (BDCD) yesterday.
The BSI and sub-indices can be interpreted as follows:
-Value above 50 means expansion or optimism compared to the previous month;
-Value of 50 means similar or no change compared to the previous month; and
-Value below 50 means contraction or less optimism compared to the previous month.
The optimism for February 2023 was indicated by the index for one month (1M) ahead, at 50.5.
There are nine sub-indices within the BSI. The Current Business Conditions sub-index, which is the main headline index, was 50 in January 2023, same as December 2022.
This indicates that private sector businesses expected similar business conditions in January 2023 compared to the previous month. One common reason cited was that January 2023 would be a quieter and shorter working month with several public holidays.
Some businesses reported that events such as the Royal Wedding, Chinese New Year and the 26th Consumer Fair would contribute to higher demand for their products and services, but others felt that the level of consumer spending would not be as high after the December holidays.
The monthly index is designed to measure business confidence or sentiment in the country, covering 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 macroeconomic indicator.
The investment sub-index was 50.0 for the current month, 50 for 1M ahead, and 50.7 for three months (3M) ahead.
This indicates that businesses expected to maintain their investment expenditures in January and February 2023 and only increase investments in the next 3M.
The main factors for increased investment are for the purchase of machinery and equipment; replacing or fixing old equipment; expansion and renovations of offices and factories; and increasing inventory in preparation for the Hari Raya Aidilfitri for 1444 Hijrah celebrations, during which more sales are expected.
The employment sub-index was 50.2 for the current month, and 50.3 for 1M ahead.
This indicates that businesses generally expected to increase their hiring in January 2023 and in the following month. Businesses said plans to increase their employees is in line with expectations that business conditions will pick up next month.
The costs sub-index was 49.9 for the current month, and 50 for 1M ahead. Companies expected the costs of running their businesses to be lower in January compared to the previous month.
The reasons included reduced activities and costs of raw materials during the month, as well as lower salary costs compared to the previous month. Businesses also expected costs for February 2023 to be similar to January.
In terms of economic sectors, five out of 11 sectors recorded optimism in January 2023.
The health and education sector (50.3) showed the biggest increase in sentiment due to the start of the new school year.
The hotels and restaurants (50.2) and the agriculture, forestry, fisheries and livestock (50.2) sectors also reported optimism in January, with expectations of increased activities related to the Chinese New Year celebration and other festive events.
Optimism was also reported by the finance and insurance (50.2) and other private services (50.2) sectors with increased activities and some companies securing contracts and projects at the start of the year.
Meanwhile, three out of 11 sectors indicated pessimism in January, with the oil and gas related (49.9) and construction (49.9) sectors citing fewer projects at the start of the year, while others were experiencing project delays due to bad weather conditions.
Similarly, the transport and communication (49.4) sector reported pessimism last month following the peak travel period experienced in December 2022.
Other sectors reported similar business conditions in January 2023 compared to last month.
Medium-sized businesses (50.3) reported better business conditions in January compared to the previous month as residents returned from year-end travels to resume domestic spending.
Meanwhile, micro, small and large companies reported similar business conditions.
The index is based on surveys conducted on almost 600 micro, small, medium and large businesses from 11 economic sectors in the Sultanate, across all districts.