IMF Executive Board Concludes 2014 Article IV Consultation with Brunei Darussalam

Press Release No. 14/335
July 9, 2014

On May 19, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Brunei Darussalam.

Oil and gas dominate Brunei’s economy, comprising two-thirds of output and most of exports and government revenues. Accumulated oil wealth and prudent policymaking have provided large fiscal and current account surpluses as well as a high standard of living for nationals, with a per capita GDP of over US$40,000. Given the nonrenewable nature of energy resources and the reliance of non-energy activity on the government sector, the authorities have embarked on a long-term strategy to diversify the economy.

In 2013, real GDP contracted 1.8 percent as the energy sector declined due to longer-than-expected maintenance of hydrocarbon facilities, which had similarly restrained growth in 2012. The non­energy sector grew at a steady 2.7 percent, driven by public development expenditure and property financing. Continued appreciation of the Singapore dollar, to which the Brunei dollar is pegged, together with administered prices, helped contain CPI inflation to 0.4 percent in 2013. The current account weakened slightly to 31 percent of GDP as oil exports declined, while the primary fiscal balance narrowed slightly to 16½ percent of GDP on increased expenditures. Total credit increased 8 percent over the year, and banks remain well-capitalized, profitable, and with declining nonperforming loan ratios.

Brunei’s economic outlook remains favorable. As the energy sector recovers, GDP growth should rise to 5½ percent in 2014. Over the medium term, acceleration in the non­energy sector due to infrastructure and downstream petrochemical projects is expected to further support growth between 4─5 percent through the medium term. The current account is expected to remain stable at around 30 percent of GDP and the fiscal balance is expected to stay robust at about 20 percent of GDP. The main risks to the economy stem from energy prices, to which Brunei appears well-cushioned by substantial fiscal buffers.

Looking ahead, key policy priorities include increasing human capital and generating employment opportunities, particularly for the youth, enhancing financial sector depth, and boosting private sector growth.

Executive Board Assessment2

Executive Directors commended the authorities for the prudent policies that have promoted macroeconomic and social stability. Following the recent contraction, relating to a temporary disruption in energy production, the economy is expected to rebound as production of hydrocarbons recovers. Sizable reserve assets provide a buffer against near-term risks. Directors agreed that, over the longer-term, careful fiscal planning and diversification away from hydrocarbons, while fostering private sector development, are key to employment creation and long-term sustainable growth.

Directors agreed that the current expansionary fiscal stance amid the decline in energy production is appropriate. To ensure long-term sustainability, they encouraged the authorities to formalize a medium-term fiscal policy framework. They also supported continued efforts to improve public financial management and to ensure the quality of public investment. Directors emphasized the need to formulate a long-term strategy for fuel subsidy reform with better-targeted support to improve efficiency and free up resources for long-term development goals.

Directors noted that the banking system is sound and well capitalized and welcomed the steps taken to strengthen the financial sector architecture. They saw scope for further financial sector development and encouraged additional measures in tandem with an appropriate macroprudential toolkit. Directors welcomed the improvements in the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime.

Directors noted that the current peg to the Singapore dollar continues to serve the economy well. They welcomed the Monetary Authority’s willingness to reconsider the interest rate controls and encouraged steps to expand lending to the private sector, through better use of credit information, improvements in financial reporting, as well as government support for SME financing.

Directors emphasized that a more conducive business environment and productive labor force will help support successful diversification. Active policies are needed to promote private sector employment and increase incentives to pursue higher education and training.

Directors welcomed recent steps to improve statistical capacity. They encouraged further efforts to address remaining gaps in data compilation and dissemination.

Brunei Darussalam: Selected Economic and Financial Indicators, 2011–16




2011 2012 2013 2014 2015 2016




    Est. Proj. Proj. Proj.

Output and prices


Nominal GDP (millions of Brunei dollars)

20,996 21,185 20,158 21,901 21,785 22,330

Nominal non-energy GDP (millions of Brunei dollars)

6,656 7,051 7,452 7,848 8,235 8,667

Real GDP (percentage change)

3.4 0.9 -1.8 5.8 3.0 3.4

Energy sector GDP

3.3 -2.5 -7.2 8.0 0.6 4.3

Non-energy GDP

3.5 4.0 2.7 4.1 4.8 2.7

Average oil price (U.S. dollars per barrel) 1/

116.1 117.6 115.0 115.9 108.6 103.3

Average gas price (U.S. dollars per million BTU) 1/

16.5 17.9 16.8 16.8 16.7 16.7

Consumer prices (period average, percentage change)

0.1 0.1 0.4 0.5 0.5 0.5

Consumer prices (end of period, percent change)

0.2 0.0 0.1 0.5 0.5 0.5
      (In percent of GDP)

Public finances: budgetary central government


Total revenue

61.1 51.7 54.0 55.9 54.0 55.7

Oil and gas

55.8 48.0 46.9 50.8 48.5 50.1


5.3 3.7 7.1 5.2 5.5 5.6

Total expenditure

33.0 34.8 37.3 35.2 36.7 36.2


25.4 24.7 26.6 25.5 25.7 25.4


7.6 10.1 10.7 9.7 11.0 10.7

Of which: development expenditure

5.5 6.4 6.9 6.4 7.3 7.2

Overall primary balance

28.1 16.8 16.6 20.7 17.2 19.5

Overall primary balance excluding royalties

28.0 16.6 16.6 20.7 17.2 19.5

Non-energy overall primary deficit

-22.3 -26.0 -25.1 -24.8 -26.1 -25.3
      (12-month percent change)

Money and banking 2/


Private sector credit

-5.0 1.8 7.0

Narrow money

10.9 1.4 1.5

Broad money

10.1 0.9 -1.1
      (In millions of U.S. dollars, unless otherwise indicated)

Balance of payments 3/


Trade balance

8,384 8,763 7,514 7,983 7,264 6,761


12,465 12,881 11,457 12,389 12,165 12,391

Of which: oil and gas

11,896 12,472 11,038 11,951 11,704 11,905


4,081 4,118 3,944 4,407 4,901 5,630

Services (net)

-1,441 -2,157 -2,018 -2,200 -2,143 -2,166

Income (net) 4/

-320 -457 -11 167 486 840

Current transfers

-548 -475 -497 -524 -548 -576

Current account balance 4/

6,075 5,674 4,988 5,426 5,059 4,859

Current account balance (percent of GDP)

36.4 33.5 30.8 31.4 29.7 28.1

Gross official reserves 5/

2,487 3,285 3,539 3,465 3,342 3,404

Foreign exchange cover of currency issued (in percent) 5/

156.5 156.5 156.5 156.5 156.5 156.5


Brunei dollars per U.S. dollar (period average)

1.26 1.25 1.25

Sources: Data provided by the Brunei authorities; and IMF staff estimates.

1/ Based on WEO January 2014 projections for oil and gas prices.

2/ Data for 2013 are as of end-October 2013.

3/ Includes official revisions in March 2014 reflecting improvements in data coverage and methodology.

4/ Fund staff estimates.

5/ Comprises foreign exchange assets of Autoriti Monetari Brunei Darussalam (Brunei Currency and Monetary Board prior 2011), SDR holdings, and reserve position in the Fund.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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