| Azlan Othman |
BRUNEI Darussalam’s real GDP growth is projected to be 1.6 per cent this year and 3.4 per cent next year with inflation rates of 0.2 per cent in 2018 and 0.4 per cent in 2019, according to a report by ASEAN+3 Macroeconomic Research Office (AMRO).
Next year onwards, the pace of the country’s economic growth is projected to increase rapidly on the back of the performance of new downstream industries that will commence commercial production and exports from 2019, AMRO revealed in its flagship ‘ASEAN+3 Regional Economic Outlook (AREO) 2018’ report released on Wednesday.
ASEAN+3 includes 10 ASEAN economies and three other large economies – China, Japan and South Korea.
“Resource-dependent economies like Brunei Darussalam have begun the process of trade integration through manufactured goods exports, or are in the process of diversifying their economies away from mining towards manufacturing,” the report said.
“After four years of contraction, the Brunei economy showed signs of improvement, driven by a recovery in the oil and gas sector and an expansion in investment.
“Between 2013 and 2016, the economy contracted as oil prices plummeted to their lowest level in a decade and oil production suffered from unexpected disruptions.
“Since the second quarter of 2017, growth has improved on the back of higher oil and gas production and expanding private investment,” the report noted.
“A moderate recovery in oil and gas prices and further progress of major infrastructure and foreign direct investment (FDI) construction projects are expected to contribute to positive GDP growth of 0.6 and 1.6 per cent in 2017 and 2018, respectively.
“For 2018, inflation is expected to turn positive in line with strengthening domestic demand,” it added.
The report also said exports during January to November 2017 grew by 11.5 per cent compared to -22.4 per cent in the previous year in line with a modest recovery in oil prices.
However, during the same period, imports grew by 14.4 per cent, rising from -18 per cent in the previous year due to the implementation of the two large scale construction projects (Temburong Bridge Project and Hengyi Oil Refinery and Petrochemical Plant Project).
Given that the services and secondary income accounts remained in deficit, the current account surplus is projected to continue to decline.
Nevertheless, it is expected to improve from 2019 onwards as the downstream industries begin their commercial production and exports, the AREO 2018 report said.
AMRO report added, “Looking ahead, high reliance on oil and gas-related factors will continue to pose risks to the economy and the fiscal sector.
There are two main risks related to the oil and gas sector: unexpected disruption in production due to ageing of oil fields and unfavourable global oil and gas prices in the medium term.
“Brunei’s economic growth and the fiscal sector are highly dependent on oil and gas production and global energy prices.
“The government sector has a very significant role in the economy with government consumption and investment accounting for more than 30 per cent of GDP.
“A further decline in oil and gas-related revenue may significantly limit the government’s capacity to support growth.”
On the regional front, AMRO said economic growth remains robust, reflecting the sustained expansion in domestic demand supported by expansionary macroeconomic policies as well as the stronger impulse from the global trade upcycle.
In most regional economies, financing conditions remain favourable amid resilient capital inflows, particularly into debt capital markets.
The positive outlook is expected to continue in the near term, although the risks of trade protectionism and tighter financial conditions have increased recently.
Boosted by favourable conditions in the global economy, regional economic growth is sustained, underpinned by resilient domestic demand and supported by expansionary macroeconomic policies and a stronger impulse from exports.
On the domestic demand side, private consumption remains resilient, underpinned by improving labour markets, higher earnings of commodity exporters from rising commodity prices, and to some extent, the easing of household debt in some economies.
In some economies such as Thailand, the start of mega-infrastructure projects is expected to provide additional impetus to growth in the period ahead.
On investment, the outlook remains positive, given the ongoing implementation of public infrastructure projects in some regional economies.
With strengthening domestic demand and a positive near-term export outlook, regional economic growth is projected to be sustained around mid-five per cent level in 2018-19, while inflation is expected to be largely stable at around two per cent level.
Most regional economies are in a mid-business cycle with a small output gap around trend growth. Some regional economies are in the late business cycle, with emerging signs of inflation and external imbalance.
AMRO’s baseline growth projection for the ASEAN+3 region is 5.4 per cent for 2018 and 5.2 per cent for 2019.
Notwithstanding, headline inflation in the region is expected to be largely stable at 2.1 per cent in 2018 and two per cent in 2019. Underlying inflation remains well anchored.