IMF Concludes 2022 Article IV Consultation with Brunei Darussalam

Washington, DC: The Govt Board of the Worldwide Financial Fund (IMF) concluded the 2022 Article IV session[1]with Brunei Darussalam on a lapse-of-time foundation.[2]

After efficiently weathering the pandemic in 2020, Brunei was hit by new waves of COVID-19, with case numbers going up considerably and new lockdown measures imposed in H2 2021. Lowered actions in mining and LNG manufacturing, mixed with the destructive impression of latest pandemic variants on home providers, led to a slowdown within the economic system. GDP contracted by 1.6 % in 2021, led by slowdowns in O&G mining, LNG manufacturing, and downstream actions. Agriculture and a few non-O&G manufacturing sectors noticed encouraging development, although the shares of those sectors in whole GDP stay small.

For 2022, development is projected to rebound to 1.2 %, on the again of easing of mobility constraints and a optimistic phrases of commerce shock resulting from surges in O&G costs. Inflation, whereas remaining comparatively low at 2.2 % at finish 2021, has elevated in 2022 and pressures are anticipated to stay elevated within the brief time period, owing to produce disruptions and better meals and gas costs. The economic system continues to diversify, with double-digit development of the meals/agriculture sector and a brand new fertilizer sector commencing manufacturing. The dangers to the outlook are tilted to the draw back, resulting from potential new COVID-19 variants, elevated international uncertainty related to an escalation of the battle in Ukraine, financial tightening from the US and a larger-than-expected development slowdown in China. On the upside, larger power costs would additional enhance the phrases of commerce and restore fiscal positions within the brief time period, whereas partially contributing to construct the buffers wanted to make sure stronger intergenerational fairness.

Insurance policies ought to proceed to help the restoration within the brief time period, whereas selling financial diversification in the long term . Focused fiscal help―leveraging Brunei’s ample fiscal reserves with nearly no public debt―stays essential to alleviate the impact of the pandemic on weak companies and households. On the identical time, reforms to enhance fiscal sustainability and intergenerational fairness ought to be superior. Pandemic aid measures to the monetary sector ought to be eliminated, whereas financial coverage ought to be aware of inflation dangers. Measures to foster monetary deepening are key to spur personal sector improvement. Financial diversification, past oil and gasoline, ought to be ramped up by increasing export portfolio and attracting high quality FDIs. Insurance policies to develop human capital and MSMEs would assist lay the muse for larger potential development. Supporting digital and inexperienced development would assist to strengthen resilience in the long run.

Brunei has made noticeable efforts in fiscal consolidation and financial diversification, facilitating personal sector employment and FDI attraction. A number of initiatives to enhance fiscal positions have been applied, such because the fiscal consolidation program geared toward decreasing wasteful spending within the medium time period, a containment in public employment, and the introduction of latest pension scheme to extend employer’s contribution fee. The authorities have accelerated their efforts to diversify the economic system, together with by attracting massive FDIs within the oil refinery sector and growing investments in strategic industries similar to agriculture and O&G downstream sectors. Continued efforts in taking part in regional financial integration, together with the Regional Complete Financial Partnership (RCEP) settlement that got here into drive this 12 months and the brand new Indo-Pacific Financial Framework, have been made to offer new market entry and funding alternatives for entrepreneurs and industries in Brunei. The authorities are introducing varied packages, such because the i-Prepared apprenticeship program and SkillsPlus program, to upskill and reskill the workforce and to adapt to the evolving demand of personal sector employers. Additionally, they’re implementing varied insurance policies to help the event of productive MSMEs, similar to facilitating entry to monetary assets and bettering entrepreneurship talent coaching.

Govt Board Evaluation

Govt Administrators recommended the authorities for adopting insurance policies to cushion the impression of the pandemic in addition to for the spectacular vaccination rollout. Administrators noticed {that a} sturdy financial restoration is underway, on the again of additional lifting of COVID-19 restrictions, funding in massive petrochemicals initiatives, and better oil and gasoline costs. Noting that dangers to the outlook are tilted to the draw back, Administrators harassed the necessity to keep supportive insurance policies till a non-public sector led restoration is on a agency path. Additionally they harassed the necessity for steady reform efforts to advertise financial transformation, foster resilience, and speed up inexperienced, digital, and inclusive development.

Administrators underscored the necessity to keep focused fiscal help for weak companies and households within the close to time period, whereas stepping up fiscal reforms to enhance fiscal sustainability and intergenerational fairness in the long term. Administrators welcomed the authorities’ steady efforts to strengthen the fiscal place. They famous a number of initiatives to enhance the effectivity of public spending, streamline untargeted subsidy and social spending, rationalize public employment, and mobilize income. Additionally they famous that the total implementation of the medium-term fiscal framework would assist to stabilize public funds.

Administrators famous that financial liquidity operations ought to be aware of inflation dangers. Administrators welcomed the resilience of the banking sector and authorities’ current efforts to strengthen the AML/CFT regulatory and supervisory framework in addition to implement the Basel III framework and improve stress testing for improved monetary sector stability. Administrators concurred that fostering monetary deepening is essential to spur personal sector improvement.

Administrators agreed that the peg to the Singapore greenback stays applicable, offering a reputable nominal anchor for macroeconomic and monetary stability, and serving to to deepen commerce and funding linkages, together with with Singapore. They harassed the significance of ongoing diversification to enhance fundamentals and guarantee a balanced exterior place over the medium time period. They inspired the authorities to proceed to increase the export portfolio, appeal to high quality FDI, enhance enterprise setting, put money into human capital, and develop micro, small and medium measurement enterprises. Administrators additionally highlighted that fostering digital and inexperienced development would create new companies and job alternatives and improve financial resilience.

Administrators famous the measures taken to enhance knowledge administration and inspired the authorities to additional enhance knowledge compilation and dissemination. Additionally they welcomed the current shut cooperation in Capability Improvement (CD) with the IMF, together with the authorities’ plan to request additional CD.