Brunei Darussalam’s businesses were anticipating an upswing in activity with the return to regular working hours in May 2023. Optimism was bolstered by ongoing projects and expectations of increased demand, particularly in the hotels and restaurants sector.
However, this positivity was dampened by several private companies foreseeing a slower business pace following the post-Hari Raya Aidilfitri period.
The Brunei Darussalam Central Bank (BDCB) revealed these findings in the Brunei Darussalam’s Business Sentiment Index (BSI) for May 2023. The index, based on surveys among approximately 500 micro, small, medium, and large businesses across all districts assessed the country’s economic sectors.
Looking ahead, the index for one month ahead stood at 49.8, indicating that businesses generally expected less favourable conditions in June compared to May.
The projection was influenced by seasonal effects, as business activities and demand typically slow down following the Hari Raya Aidilfitri festivities.
The monthly BSI index, designed to gauge business confidence and sentiment, measured various aspects such as current and future business conditions, investments, employment, and operational costs.
The BSI acts as a leading macroeconomic indicator due to its forward-looking nature. A value above 50 indicates expansion and optimism compared to the previous month, while 50 signifies similarity or no change, and a value below 50 indicates contraction or less optimism.
The BSI encompasses nine sub-indices. The headline index, the Current Business Conditions sub-index, registered 50.0 in May, compared to 49.8 in April.
According to the BDCB, opinions regarding business performance in May varied across sectors, but the general sentiment was similar to that of April.
The Investment sub-index for the current month reached 50.1, while projections for one month ahead and three months ahead were 49.9 and 50.0. This suggests that businesses generally expected to increase their investment expenditure in May. Factors contributing to these expectations included inventory stocking, purchasing new machinery, equipment, and vehicles, renovation and expansion projects, as well as the opening of new branches.
However, businesses anticipated a slowdown in spending going forward, as major investments were typically made earlier in the year.
Regarding employment, the sub-index for the current month was 50.2, with a projection of 50.3 for one month ahead. Businesses continued their trend of increasing employee headcounts in May and June. However, challenges in securing foreign workers, recruitment delays, high hiring costs, and difficulties finding individuals with the required skill sets remained prevalent. To overcome the manpower shortage, some businesses resorted to hiring part-time workers and collaborating with local colleges and universities to provide interns and attachment students. The Costs sub-index for the current month registered 50.2, with a projection of 50.4 for one month ahead. Businesses generally anticipated higher operating costs in May and June compared to previous months. The resumption of regular working hours contributed to increased operating costs, although some businesses reported higher utility and maintenance expenses.
Additionally, businesses expected rising costs of imported goods, increased salary expenses due to higher employment, and expenses associated with the anticipated uptick in business activities and production across various sectors.
Among the economic sectors, four out of 11 sectors experienced improved business conditions in May. The Hotels and Restaurants’ sector displayed the highest optimism at 50.6, indicating improved conditions as businesses resumed normal operations after Ramadhan.
The Health and Education sector recorded an index of 50.2, reflecting the sector’s positive outlook due to additional workforce and a return to normal working hours.
The Transport and Communication sector and other private services sector reported optimistic business conditions in May, driven by expectations of more projects, increased customer base, and higher consumption of their products and services.
On the contrary, the Construction sector and the Wholesale and Retail Trade sector reported pessimistic business conditions.
The contraction in the Construction sector was attributed to a lack of new projects during the Hari Raya season, while the Wholesale and Retail Trade sector expected declining sales as customers had already spent in advance for the festivities celebrations in the previous month.
The Oil and Gas related sector, the Manufacturing sector, the Finance and Insurance sector, the Agriculture, Forestry, Fisheries, and Livestock sector, as well as the Real Estate and Ownership of Dwellings sector, reported business conditions similar to April.
When analysed by business size, small and medium-sized businesses expected better conditions in May compared to April, as they anticipated increased sales during the festive season.
In contrast, micro-sized businesses anticipated a slight weakening of conditions due to licencing and labour issues. Large-sized businesses expected business conditions to remain similar to those in April.
The BSI provides valuable insights into Brunei’s economic landscape, guiding businesses in their decision-making process and offering a comprehensive outlook on various sectors. – Azlan Othman
