The Gross Domestic Product (GDP) of Brunei Darussalam is expected to increase by 3.2 per cent in 2013 and by 2.6 per cent this year, with an inflation rate of two per cent in 2013 and 1.8 per cent this year, the Asian Development Bank (ADB) said in its latest regional outlook report on the Sultanate.
The report said, this hydrocarbon-based economy grew slightly faster in 2011 and is expected to maintain modest growth during the forecasted period. The pace of inflation lifted last year, but will likely ease in 2012.
Substantial fiscal and current account surpluses provide a cushion against shocks. Diversifying sources of growth is the main challenge. ADB said, the economy grew by an estimated 2.9 per cent in 2011, quickening from a revised 2.6 per cent in 2010. Growth stemmed from production and exports of natural gas and crude oil, which account for two-thirds of the GDP, and a better performance by the non-energy sector. The oil and gas sector expanded by 2.2 per cent in the first three quarters of the year, mainly owing to a 5.1 per cent increase in production of liquefied natural gas (LNG). A large methanol plant, opened in May 2010, made its first full-year contribution to growth in 2011.
The non-energy sector grew by 2.8 per cent in the three quarters. It comprises mainly government services, and small agriculture as well as manufacturing output. Government services (about one quarter of the economy) grew by 3.3 per cent in the three quarters. Strong growth of about 20 per cent was recorded in air transport, hotels and restaurant services. Manufacture of garments declined for a fourth consecutive year.
Government price controls and subsidies kept inflation to the one-two per cent range most years – a bracket again achieved for the full year (two per cent on average).
Higher global prices for food and other consumer goods nudged up inflation to 2.8 per cent year on year in October 2011, before it receded. Tobacco prices jumped after the government raised excise duties on tobacco in November 2010.
Helping to contain inflation, the Brunei dollar appreciated against the US dollar by 8.4 per cent on average last year, a result of its peg to the Singapore dollar through a currency board arrangement.
Merchandise exports, mostly LNG and oil, rose by an estimated 32.5 per cent to US$12.4 billions in 2011, propelled by higher global prices for hydrocarbons. According to import data from Japan and the Republic of Korea, the biggest LNG customers, in 2011, these countries together lifted their purchases from Brunei Darussalam of LNG by 39 per cent (to US$5.6 billion) and of oil by 33 per cent (to US$1.9 billion).
Merchandise imports are much lower than exports, reflecting the small economy (GDP of around US$17 billion in 2011. Imports rose by an estimated 19.3 per cent to US$2.8 billion in 2011.
The trade surplus soared and the current account surplus increased to an estimated 50 per cent of GDP. Taxes, dividends, and royalties from hydrocarbons provide the government with about 90 per cent of its revenue to fund wages for the large public sector and finance public services and subsidies. Rising oil prices boosted revenue by 43 per cent in FY2010 (ended March 31, 2011). Government spending fell slightly owing to a decline in capital outlays, leaving a fiscal surplus equivalent to about 16 per cent of GDP.
Concerned about rising household debt and banks’ high exposure to consumer loans, the authorities required banks to curb consumer lending and they tightened limits on credit card debt. The ratio of consumer loans to total credit fell sharply to 39 per cent as at September 2011. Lending to the private sector fell by 5.3 per cent during the first seven months of 2011.
The economy is expected to maintain modest growth during the forecast period, based on solid demand and prices of oil, investment in oil exploration, high levels of government spending, and gradual development of the non-energy sector. Inflation is projected to ease slightly to average 1.8 per cent in 2012 as prices of imported food soften.
It will edge up in 2013. Large current account surpluses are likely to be sustained, mainly on exports of oil and gas, and on income flows from the country’s overseas investments.
On the regional and global economy, ADB stated that emerging Asian economies will experience flat growth this year before recovering in 2013, the ADB said in a regional report released Wednesday, AFP reported.
Borneo Bulettin – by: Azlan Othman