Brunei economy to grow 3.7pc: ADB

Brunei Darussalam’s financial development is projected to be 3.7 per cent this yr and a couple of.8 per cent subsequent yr (2025), based on the Asian Growth Outlook April 2024 launched on Thursday by the Asian Growth Financial institution (ADB).

The report was launched per week after the ASEAN+3 Macroeconomic Analysis Workplace (AMRO) revealed its personal annual flagship report, ASEAN+3 Regional Financial Outlook 2024 which forecasted Sultanate’s financial development to be 2.7 per cent this yr and a couple of.9 per cent in 2025.

The ADB report mentioned Brunei’s development will speed up in 2024, partly because of a pickup that began within the second half of 2023.

A rebound in companies underpinned the financial restoration over the past three years, however the outlook for the following two years will depend on restoration within the oil and fuel (O&G) sector.

Headline inflation has been subdued not too long ago, however meals costs stay excessive. Fiscal consolidation and income diversification are wanted within the medium time period to make sure fiscal fairness.

The report mentioned Brunei’s financial system had sturdy development within the fourth quarter of 2023. The long-subdued O&G continued to assist development. Regardless of indicators of a sector recorded its first development prior to now three years, slowdown in consumption in supply-side information, personal pushing gross home product (GDP) development up by 6.8 per cent.

In the meantime, development in companies, which has remained robust for the reason that second half of 2022, considerably slowed.

That is because of the normalisation in meals and beverage companies, which had exceptionally robust gross sales development within the second half of 2022 and the primary half of 2023.

On the demand facet, Sultanate’s personal consumption continued to assist development. Regardless of indicators of a slowdown in consumption in supply-side information, personal consumption on the demand-side grew by 4.8 per cent within the fourth quarter.

Fastened funding, in contrast, continued to say no. Weaker home demand dragged down imports by 8.3 per cent on weak equipment and transport tools imports, contributing to GDP development for the fourth consecutive quarter.

Nonetheless, exports continued to say no for the fourth straight quarter, as exports of minerals, together with O&G, fell in comparison with the identical interval final yr.

Development is forecast to speed up to three.7 per cent in 2024. Development is anticipated to stay extra sturdy than the historic development because the financial system continues to recuperate from the after- results of COVID-19.

Beforehand deferred funding within the O&G sector will increase fastened funding over the forecast interval. Supported by the alternative of manufacturing tools and the opening of the Salman oilfield, day by day oil manufacturing is anticipated to recuperate from 89,000 barrels per day to 95,000 barrels per day.

Liquefied pure fuel manufacturing is anticipated to recuperate from 678 billion British thermal models (BTU) per day to greater than 700 BTU per day. The restoration in O&G manufacturing will increase development by larger exports. As manufacturing is anticipated to normalise in 2024, development will reasonable to 2.8 per cent in 2025.

The report additionally mentioned financial diversification will proceed below the Brunei Imaginative and prescient 2035 plan. The Sultanate’s long-standing efforts at financial diversification confirmed some progress in 2023.

In agricultural product exports, leveraging its dependable halal certification system, the nation signed a commerce facilitation settlement with Sabah, Malaysia for halal meals merchandise. Additionally, the nation shipped its first native meals exports to Singapore in September. Brunei can also be investing to reap the benefits of its proximity to many offshore oil fields to grow to be a ship dismantling and restore centre.

The demand for restore and disposal of associated amenities in Southeast Asia is anticipated to develop within the coming years. Funding within the yard at Pulau Muara Besar by a public-private partnership started in 2022, with building anticipated to be accomplished in 2025.

If profitable, the built-in yard challenge is anticipated to carry extra employment and revenue alternatives, the report acknowledged.

That ought to assist lower the ratio of the O&G sector to GDP, which is at the moment round 50 per cent.

The expansion outlook depends closely on the restoration in O&G manufacturing. Dangers are tilted to the draw back. Restricted personal funding for upkeep and renewal in prior years might decrease the working charge of manufacturing amenities and, thus, future output within the O&G sector. The federal government recognises that rising geopolitical rigidity is a draw back threat on development and an upside threat for inflation as it could dampen oil costs through weaker world demand and enhance manufacturing prices by provide chain disruptions.

But elevated worldwide power costs, if extra persistent than at the moment anticipated, will likely be a tailwind for the nation’s commerce and financial balances over the forecast interval. – Azlan Othman