## 2024. Implementation of stress tests is recommended, while considering stress testing for ## Source details **Canonical URL:** [2024. Implementation of stress tests is recommended, while considering stress testing for](https://www.imf.org/-/media/files/publications/cr/2024/english/1brnea2024001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2024/english/1brnea2024001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2024/english/1brnea2024001-print-pdf.pdf.json) --- ### Key policy recommendations and actions - Implement stress tests, including consideration of stress testing for climate transition and physical risks. - Further strengthen prudential frameworks; develop a long-term sukuk market; establish a green taxonomy; and unify disclosure standards. - Improve AML/CFT effectiveness and continue implementing recommended actions in the APG’s Mutual Evaluation Report. - Commit to ambitious and sustained structural reforms to ensure growth and diversification, including transitioning to a low-carbon economy. - Continue development of the non-O&G sector through adoption of green technologies and skill development; address AI-related challenges and close structural gaps in first-generation reform areas (external sector trade facilitation, improving business regulation, and governance). - Complete the 2025 National Adaptation Plan and a Climate Vulnerability Assessment to prioritize adaptation strategies. - Strengthen data reporting and close identified data gaps in national income, prices, external and fiscal sectors; improve external sector data through a survey to better gauge trends in errors and omissions, and payables/receivables. - Strengthen public financial management (PFM), align further with GFSM (2014), and enhance dissemination via the Fund’s e-GDDS portal. ### Outlook, risks, and macro policy guidance - Outlook: - Recovery expected to continue, with growth strengthening in 2024 due to increased O&G production, including from new fields. - Real GDP (percent change): 2023: 1.4; 2024 (Proj.): 2.4; 2025 (Proj.): 2.6; 2026 (Proj.): 2.6; 2027 (Proj.): 2.7; 2028 (Proj.): 2.9; 2029 (Proj.): 3.1. - Inflation: - Projected to remain unchanged; headline inflation at 0.7 by December 2023 and -0.2 percent in May 2024 noted. - Consumer prices (period average, percent change): 2023: 0.4; 2024 (Proj.): 0.5; 2025 (Proj.): 1.0; 2026 (Proj.): 1.0; 2027 (Proj.): 1.0; 2028 (Proj.): 1.0; 2029 (Proj.): 1.0. - Risks: - Broadly balanced; near-term risks tilted downward due to external factors and O&G production challenges; new O&G field discoveries provide significant upside despite decarbonization pressures. - Downside risks: supply chain disruptions, China slowdown, food price spikes, disorderly energy transition. - Upside: structural reforms, AI-driven productivity gains, higher O&G prices and discoveries. - Fiscal policy recommendations: - Maintain a prudent fiscal stance given the narrowing output gap, uncertainty around O&G revenues and long-term decarbonization trends. - Protect the vulnerable and public investment by enhancing revenue generation (example: a supportive low-rate carbon tax) and expenditure rationalization (example: more targeted subsidies). - Establish a rules-based medium-term fiscal framework (MTFF); broaden coverage of the fiscal framework to enhance fiscal transparency and fiscal risk analysis. - Integrate climate-related risk analysis into economic planning. - Monetary operations: - Continue aligning policy rates with the Monetary Authority of Singapore (MAS) under the currency board arrangement. - Improve monetary policy transmission by actively managing liquidity and develop a domestic interbank market. - Over the medium term, build internal capacity in liquidity forecasting. - Financial policy: - Closely monitor credit growth; ensure foreign loans are invested in high credit-rated assets to mitigate credit risk. - Continue deploying prudential measures, maintain NPL standards, and implement Basel III standards for better liquidity management by the end of 2024. ### Data, surveillance, and capacity issues - Data provided to the Fund has shortcomings that somewhat hamper surveillance; data quality should be strengthened. - Steps needed to close identified data gaps in national income, prices, external and fiscal sectors. - Strengthen reporting for physical and transition-linked climate exposures to ensure a successful transition. - Plans to enhance dissemination via the Fund’s e-GDDS portal are welcome. - Specific data actions and status: - GDP rebasing to 2023 is planned; a census of enterprises to support Supply-Use Table (SUT) for 2023 is in progress. - CPI consumption basket update based on ongoing household expenditure survey (HES). - Authorities plan to disseminate 2024Q1 and Q2 BOP data via e-GDDS starting 2024Q3. - Selected timeliness entries (as of July 2024): Exchange Rates latest 06/2024; International Reserve Assets latest 04/2024; CPI latest 05/2024; GDP/GNP latest Q1/2024. ### Recent developments and context - Growth and production: - Brunei faces complex diversification challenges and a protracted post-pandemic recovery; real GDP rose by 1.4 percent in 2023 after two years of recession. - Recovery in 2023 driven mainly by the non-O&G sector and earlier-than-expected supply from a new O&G field in Q4 2023. - Persistent upstream and downstream O&G production challenges until H1 and Q3 2023 weakened fiscal and external positions in 2023. - Share of non-O&G sector in real GDP increased from 20 percent in 2003 to 53.6 percent in 2023. - Exchange rate and policy rates: - Currency board with Singapore helps anchor inflation expectations. - BDCB aligned Overnight Standing Facility Lending Rates with Singapore and raised SFDR to 3.0 percent from 1.5 percent through three consecutive 50 basis points hikes in April, May, and June 2024. ### Selected key statistics and projections - Country and labor: - Area: 5,765 sq. kilometers - Population (2023): 450,500 - Nominal GDP per capita (2023): US$33,581.1 - Main export destinations (2023): Australia (21.5 percent), China (16.9), Singapore (16.7) - Unemployment rate (2023): 5.1% - Labor force participation rate (2023): total 67.2; male 75.8%; female 57.3% - Nominal GDP (millions of Brunei dollars): 2019: 18,375; 2020: 16,564; 2021: 18,822; 2022: 23,003; 2023: 20,319; 2024 (Proj.): 20,893; 2025 (Proj.): 22,197; 2026 (Proj.): 23,073; 2027 (Proj.): 24,081; 2028 (Proj.): 25,153; 2029 (Proj.): 26,447. - Nominal non-oil and gas GDP (millions of Brunei dollars): 2019: 8,268; 2020: 8,868; 2021: 9,790; 2022: 11,043; 2023: 10,883; 2024 (Proj.): 11,386; 2025 (Proj.): 12,411; 2026 (Proj.): 13,620; 2027 (Proj.): 15,045; 2028 (Proj.): 16,281; 2029 (Proj.): 17,717. - Oil and gas sector GDP (real growth): 2019: 3.9; 2020: -4.9; 2021: -4.8; 2022: -7.3; 2023: -2.0; 2024 (Proj.): 2.6; 2025 (Proj.): 3.1; 2026 (Proj.): 3.1; 2027 (Proj.): 1.7; 2028 (Proj.): 1.1; 2029 (Proj.): 1.0. - Non-oil and gas sector GDP (real growth): 2019: 3.9; 2020: 8.9; 2021: 2.0; 2022: 4.3; 2023: 4.5; 2024 (Proj.): 2.1; 2025 (Proj.): 2.0; 2026 (Proj.): 2.1; 2027 (Proj.): 3.5; 2028 (Proj.): 4.4; 2029 (Proj.): 4.7. - Oil production ('000 barrels/day): 2019: 121; 2020: 110; 2021: 107; 2022: 92; 2023: 74; 2024 (Proj.): 84; 2025 (Proj.): 94; 2026 (Proj.): 94; 2027 (Proj.): 99; 2028 (Proj.): 90; 2029 (Proj.): 90. - Natural gas output (millions BTUs/day): 2019: 1,402; 2020: 1,358; 2021: 1,253; 2022: 1,151; 2023: 1,214; 2024 (Proj.): 1,226; 2025 (Proj.): 1,201; 2026 (Proj.): 1,220; 2027 (Proj.): 1,277; 2028 (Proj.): 1,313; 2029 (Proj.): 1,313. - Average Brunei oil price (U.S. dollars per barrel): 2019: 68.6; 2020: 43.3; 2021: 72.1; 2022: 107.7; 2023: 87.1; 2024 (Proj.): 89.5; 2025 (Proj.): 83.3; 2026 (Proj.): 79.9; 2027 (Proj.): 77.0; 2028 (Proj.): 75.1; 2029 (Proj.): 73.8. - Average Brunei gas price (U.S. dollars per million BTU): 2019: 9.1; 2020: 6.7; 2021: 9.1; 2022: 14.4; 2023: 10.9; 2024 (Proj.): 8.6; 2025 (Proj.): 9.9; 2026 (Proj.): 8.7; 2027 (Proj.): 7.8; 2028 (Proj.): 7.4; 2029 (Proj.): 7.0. - Balance of Payments (millions of U.S. dollars): Current account balance: 2019: 894; 2020: 514; 2021: 1,570; 2022: 3,264; 2023: 1,949; 2024 (Proj.): 2,328; 2025 (Proj.): 2,532; current account balance (percent of GDP): 2019: 6.6; 2020: 4.3; 2021: 11.2; 2022: 19.6; 2023: 12.9; 2024 (Proj.): 15.0; 2025 (Proj.): 15.5. - Gross Official Reserves (millions of U.S. dollars): 2019: 4,273; 2020: 3,997; 2021: 4,980; 2022: 5,035; 2023: 4,485; 2024 (Proj.): 4,583; 2025 (Proj.): 4,682. In months of next year's imports: 2019: 8.0; 2020: 5.2; 2021: 5.9; 2022: 6.6; 2023: 5.9; 2024 (Proj.): 5.9; 2025 (Proj.): 5.9. ### Public finances — fiscal stance, composition, and projections - Budgetary Central Government (percent of GDP; selected series): - Total revenue: 2019: 26.4; 2020: 12.6; 2021: 24.0; 2022: 28.3; 2023: 17.3; 2024 (Proj.): 19.3; 2025 (Proj.): 18.9; 2026 (Proj.): 17.5; 2027 (Proj.): 16.3; 2028 (Proj.): 15.5; 2029 (Proj.): 15.1. - Oil and gas revenue: 2019: 19.8; 2020: 7.7; 2021: 20.2; 2022: 24.5; 2023: 13.0; 2024 (Proj.): 13.6; 2025 (Proj.): 13.4; 2026 (Proj.): 12.2; 2027 (Proj.): 11.1; 2028 (Proj.): 10.1; 2029 (Proj.): 9.5. - Other revenue: 2019: 6.5; 2020: 5.0; 2021: 3.8; 2022: 3.9; 2023: 4.3; 2024 (Proj.): 5.6; 2025 (Proj.): 5.5; 2026 (Proj.): 5.3; 2027 (Proj.): 5.2; 2028 (Proj.): 5.4; 2029 (Proj.): 5.6. - Total expenditure: 2019: 31.9; 2020: 32.6; 2021: 29.1; 2022: 26.7; 2023: 29.2; 2024 (Proj.): 29.4; 2025 (Proj.): 28.6; 2026 (Proj.): 27.8; 2027 (Proj.): 26.9; 2028 (Proj.): 25.9; 2029 (Proj.): 25.1. - Current expenditure: 2019: 29.5; 2020: 31.3; 2021: 28.0; 2022: 25.7; 2023: 27.4; 2024 (Proj.): 27.0; 2025 (Proj.): 26.2; 2026 (Proj.): 25.4; 2027 (Proj.): 24.5; 2028 (Proj.): 23.6; 2029 (Proj.): 22.8. - Capital expenditure: 2019: 2.4; 2020: 1.3; 2021: 1.1; 2022: 1.0; 2023: 1.8; 2024 (Proj.): 2.4; 2025 (Proj.): 2.3; 2026 (Proj.): 2.3; 2027 (Proj.): 2.3; 2028 (Proj.): 2.3; 2029 (Proj.): 2.3. - Overall balance: 2019: -5.6; 2020: -20.0; 2021: -5.1; 2022: 1.6; 2023: -11.8; 2024 (Proj.): -10.1; 2025 (Proj.): -9.6; 2026 (Proj.): -10.2; 2027 (Proj.): -10.5; 2028 (Proj.): -10.4; 2029 (Proj.): -9.9. - Overall primary balance excluding royalties: 2019: -22.7; 2020: -25.8; 2021: -22.5; 2022: -19.8; 2023: -22.6; 2024 (Proj.): -21.5; 2025 (Proj.): -20.7; 2026 (Proj.): -20.2; 2027 (Proj.): -19.6; 2028 (Proj.): -18.7; 2029 (Proj.): -17.7. - Non-oil and Gas Balance (percent of non-oil and gas GDP): 2019: -49.5; 2020: -46.1; 2021: -44.3; 2022: -40.2; 2023: -41.8; 2024 (Proj.): -39.2; 2025 (Proj.): -36.5; 2026 (Proj.): -33.7; 2027 (Proj.): -31.1; 2028 (Proj.): -28.6; 2029 (Proj.): -26.1. - Fiscal measures and revenue mobilization: - Recommended revenue measures: reducing tax exemptions, implementing a goods and services tax (GST) and personal income tax, adjusting tax rates (including property tax), expanding excise taxes, carbon pricing, phasing out fossil fuel subsidies, and digitalizing the tax system. - Carbon pricing potential: $50 per tonne carbon tax by 2030 could generate 1.6-7.2 percent of GDP above the baseline in 2030. - FY2023/24 fiscal aggregates (millions of BND): - Revenue: 2023/24 Est. 3,532; Tax: 2023/24 Est. 1,253 (Oil and gas (tax): 2023/24 Est. 883; Other (tax): 2023/24 Est. 370); Nontax revenue: 2023/24 Est. 2,279 (Oil and gas (nontax): 2023/24 Est. 1,767; Other (nontax): 2023/24 Est. 512). - Expenditure: 2023/24 Est. 5,946 (Current: 2023/24 Est. 5,580; Wages and salaries: 2023/24 Est. 2,085; Other: 2023/24 Est. 3,494; Royalty payment: 2023/24 Est. 458; Capital/Development expenditure: 2023/24 Est. 367). - Overall balance 2/: 2023/24 Est. -2,414; Non-oil and gas overall balance: 2023/24 Est. -4,606. - Nominal GDP (memorandum): 2023/24 Est. 20,391; Non-oil and gas GDP (memorandum): 2023/24 Est. 11,027. ### Banking sector, financial soundness, and market development - Banking sector soundness and indicators (2023): - Capital ratio: around 21 percent of risk-weighted assets (regulatory requirement 10 percent). - Gross NPL: 2.6 percent (2023), down from 3.3 percent in 2022. - Banks’ return on assets (before tax): 2.1 percent (2023). - Regulatory capital to risk-weighted assets: 2023: 21.1 (percent). - Tier 1 capital to risk weighted assets: 2023: 21.4 (percent). - Provision coverage (specific provisions to total NPLs): 2023: 37.2 (percent). - Return on equity (after tax): 2023: 13.7 (percent). - Liquid assets to total assets: 2023: 43.6 (percent). - Loans to deposits ratio: 2023: 43.7 (percent). - Lending and liquidity patterns: - Domestic credit growth: slowed to 2.0 percent y/y in 2023 from 6.0 percent in 2022. - Corporate credit growth: slowed to 3.5 percent from 8.8 percent. - Household credit: picked up to 5 percent y/y. - Private Sector Credit (12-month percent change): 2019: 2.0; 2020: 0.2; 2021: 2.7; 2022: 6.0; 2023: 3.9; 2024 (Proj.): 2.0; 2025 (Proj.): 2.0; 2026 (Proj.): 2.0; 2027 (Proj.): 2.0; 2028 (Proj.): 2.0; 2029 (Proj.): 2.0. - Offshore lending surged: offshore loans by Brunei-based banks to Bruneian corporates rose by 64 percent y/y by end-2023. - Offshore assets stable around 51-53 percent of total assets over the past five years. - Around 12.3 percent of deposits are from the government as of March 2024, declining from 13.9 (32.2) percent in December 2023 (2022). - Counterparty quality offshore: 82 (11) percent of industry counterparties offshore have a rating of A- (BB) and above. - Prudential and market development actions: - Authorities expected to formally implement Basel III liquidity coverage ratios (LCR) before end-2024. - Historical prudential measures: capping the Total Debt Service Ratio (2015); assessing unsecured personal loan exposure (2015); enhancing and maintaining NPL definitions (2018). - Recommended: further strengthen risk-based supervision, enhanced stress testing (including climate stress tests), develop domestic interbank market, step up BDCB I-Bill issuance, establish Master legal documentation for interbank placements, and establish a Brunei reference rate. - Market deepening: guidelines for issuance of debentures updated (2022, amended January 2024); Islamic investment regulations legislated in September 2023; Brunei joined Regional Payment Connectivity (RPC) in April 2024; digital payment hub integration underway. - Authorities exploring development of a long-term sukuk market and deeper collaboration between BDCB and MOFE. ### External sector developments and assessment - Current account: - CA surplus narrowed to 12.9 percent of GDP in 2023 from 19.6 percent in 2022. - Drivers: lower O&G exports due to lower O&G prices and production and planned maintenance at the oil refinery and petroleum plant; higher service imports and net income outflows. - Exports of crude oil and LNG decreased by 24 percent y/y in 2023; exports of O&G downstream products decreased by 23 percent in 2023. - Imported mineral fuels and chemicals constituted 70 percent of total imports in 2023 and decreased by 24 percent y/y. - Service imports increased by 54 percent y/y, mainly driven by rebound in tourism for Bruneians travelling abroad post-COVID. - External position and reserves: - International reserves (excluding gold) estimated at USD 4.1 billion in 2023; reserve coverage equivalent to 5.4 months of imports and 33 percent of broad money. - Reserves assessed adequate at around 185 percent of the Fund’s reserve adequacy (ARA) metric in 2023. - External position assessed substantially weaker than level implied by fundamentals and desirable policy settings. - External sector assessment (EBA-Lite 3.0): - Adjusted current account balance: 12.2 percent of GDP in 2023. - Current account norm: 20.0 percent of GDP. - Implied current account gap: -7.7 percent of GDP. - Capital flows and risks: - FDI inflows became negative in 2022 and 2023 partly due to redemptions of FDI-related debt instruments after project operations commenced. - Capital outflows reflect domestic banks’ holdings of foreign assets, including excess liquidity placed abroad. - Resilience supported by currency peg to Singapore dollar and substantial sovereign wealth fund assets. ### Structural reforms, AI, and climate transition - Structural reform priorities: - Prioritize first-generation reforms—governance, external sector, and business regulation—before second-generation reforms like domestic finance and labor market changes. - Promote trade facilitation by rationalizing non-tariff barriers and simplifying export/import documentation and appeal procedures. - Reduce regulatory burden for firms (business licensing and permits), reform distortive taxes and subsidies, and lower market dominance of large firms, especially GLCs. - Improve property rights transfers and commercial case resolutions to enhance investor confidence. - Labor market and AI exposure: - Half of Brunei’s labor market is highly exposed to AI, slightly higher than world average (40 percent), yet lower than AEs such as Singapore (77 percent). - 40 percent of youth (15-24 years old) are more likely to be employed in occupations highly susceptible to displacement by AI, compared to 30 percent for peers 25+ years old. - A disproportionately low share of youth employed in occupations with high exposure and high complementarity to AI: 8 percent (youth) vs. 28 percent (25+ years old). - Climate transition: - Reaching net zero emissions goal by 2050 requires continued development of the non-O&G sector, adoption of green technologies, carbon pricing, and energy subsidy reforms. - Complete the 2025 National Adaptation Plan and a Climate Vulnerability Assessment to prioritize adaptation strategies. - Suggested carbon pricing scenario: $50 per tonne carbon tax by 2030 could generate 1.6-7.2 percent of GDP above the baseline in 2030. ### Risk assessment and policy responses (selected entries) - External risks (selected): - Intensification of regional conflict(s): Likelihood High; Expected impact Medium; Policy response: expand fiscal reserves, accelerate food production, support vulnerable households while allowing pass-through of international prices. - Commodity price volatility: Likelihood High; Expected impact High; Policy response: expand fiscal reserves, accelerate food production, support needy households. - Disorderly energy transition: Likelihood Medium; Expected impact Medium; Policy response: expand fiscal reserves, accelerate diversification, implement well-planned energy transition scenarios. - Domestic risks (selected): - Unexpected variations in energy production: Likelihood Medium; Expected impact High; Policy response: diversify the economy, avoid procyclical fiscal policy, build fiscal reserves, strengthen contingency planning. - Accelerated productivity improvement (including AI): Likelihood Medium; Expected impact Medium; Policy response: accelerate diversification, attract FDI, decrease low-skilled job reliance. *Sources: Data provided by the Brunei authorities; and Fund staff estimates and projections contained in the supplied content.* ### 2024. Implementation of stress tests is recommended, while considering stress testing for ### 1brnea2024001-print-pdf - 2024. Implementation of stress tests is recommended, while considering stress testing for ### Key policy recommendations and actions - Implement stress tests, including consideration of stress testing for climate transition and physical risks. - Further strengthen prudential frameworks; develop a long-term sukuk market; establish a green taxonomy; and unify disclosure standards. - Improve AML/CFT effectiveness and continue implementing recommended actions in the APG’s Mutual Evaluation Report. - Commit to ambitious and sustained structural reforms to ensure growth and diversification, including transitioning to a low-carbon economy. - Continue development of the non-O&G sector through adoption of green technologies and skill development; address AI-related challenges and close structural gaps in first-generation reform areas (external sector trade facilitation, improving business regulation, and governance). - Complete the 2025 National Adaptation Plan and a Climate Vulnerability Assessment to prioritize adaptation strategies. - Strengthen data reporting and close identified data gaps in national income, prices, external and fiscal sectors; improve external sector data through a survey to better gauge trends in errors and omissions, and payables/receivables. - Strengthen public financial management (PFM), align further with GFSM (2014), and enhance dissemination via the Fund’s e-GDDS portal. ### Outlook, risks, and macro policy guidance - Outlook: Recovery expected to continue, with growth strengthening in 2024 due to increased O&G production, including from new fields. - Inflation: Projected to remain unchanged; disinflation noted with headline inflation at 0.7 by December 2023 and -0.2 percent in May 2024. - Risks: Broadly balanced; near-term risks tilted downward due to external factors and O&G production challenges; new O&G field discoveries provide significant upside despite decarbonization pressures. - Structural reforms: Implementation could boost productivity; AI may bring economic and social challenges. - Fiscal policy recommendations: - Maintain a prudent fiscal stance given the narrowing output gap, uncertainty around O&G revenues and long-term decarbonization trends. - Protect the vulnerable and public investment by enhancing revenue generation (example given: a supportive low-rate carbon tax) and expenditure rationalization (example given: more targeted subsidies). - Establish a rules-based medium-term fiscal framework (MTFF); broaden coverage of the fiscal framework to enhance fiscal transparency and fiscal risk analysis. - Integrate climate-related risk analysis into economic planning. - Monetary operations: - Continue aligning policy rates with the Monetary Authority of Singapore (MAS) under the currency board arrangement. - Improve monetary policy transmission by actively managing liquidity and develop a domestic interbank market. - Over the medium term, build internal capacity in liquidity forecasting. - Financial policy: - Closely monitor credit growth; ensure foreign loans are invested in high credit-rated assets to mitigate credit risk. - Continue deploying prudential measures, maintain NPL standards, and implement Basel III standards for better liquidity management by the end of 2024. ### Data, surveillance, and capacity issues - Data provided to the Fund has shortcomings that somewhat hamper surveillance; data quality should be strengthened. - Steps needed to close identified data gaps in national income, prices, external and fiscal sectors. - Strengthen reporting for physical and transition-linked climate exposures to ensure a successful transition. - Plans to enhance dissemination via the Fund’s e-GDDS portal are welcome. ### Recent developments and context - Brunei faces complex diversification challenges and a protracted post-pandemic recovery; real GDP rebounded moderately, driven mainly by the non-O&G sector and earlier-than-expected supply from a new O&G field in Q4 2023. - Challenges persisted in downstream and upstream O&G production until H1 and Q3 2023, weakening fiscal and external positions in 2023. - The share of non-O&G sector in real GDP increased from 20 percent in 2003 to 53.6 percent in 2023. - After two years of recession, real GDP rose by 1.4 percent in 2023. Non-O&G growth in Q1 2024 exceeded expectations. - Exchange rate: Currency board with Singapore helped anchor inflation expectations; BDCB aligned Overnight Standing Facility Lending Rates with Singapore and raised SFDR to 3.0 percent from 1.5 percent through three consecutive 50 basis points hikes in April, May, and June 2024. ### Selected key statistics and projections (as presented) - Area: 5,765 sq. kilometers - Population (2023): 450,500 - Nominal GDP per capita (2023): US$33,581.1 - Main export destinations (2023): Australia (21.5 percent), China (16.9), Singapore (16.7) - Unemployment rate (2023): 5.1% - Labor force participation rate (2023): total 67.2; male 75.8%; female 57.3% - Nominal GDP (millions of Brunei dollars): - 2019: 18,375 - 2020: 16,564 - 2021: 18,822 - 2022: 23,003 - 2023: 20,319 - 2024 (Proj.): 20,893 - 2025 (Proj.): 22,197 - 2026 (Proj.): 23,073 - 2027 (Proj.): 24,081 - 2028 (Proj.): 25,153 - 2029 (Proj.): 26,447 - Nominal non-oil and gas GDP (millions of Brunei dollars): - 2019: 8,268 - 2020: 8,868 - 2021: 9,790 - 2022: 11,043 - 2023: 10,883 - 2024 (Proj.): 11,386 - 2025 (Proj.): 12,411 - 2026 (Proj.): 13,620 - 2027 (Proj.): 15,045 - 2028 (Proj.): 16,281 - 2029 (Proj.): 17,717 - Real GDP (percentage change): - 2019: 3.9 - 2020: 1.1 - 2021: -1.6 - 2022: -1.6 - 2023: 1.4 - 2024 (Proj.): 2.4 - 2025 (Proj.): 2.6 - 2026 (Proj.): 2.6 - 2027 (Proj.): 2.7 - 2028 (Proj.): 2.9 - 2029 (Proj.): 3.1 - Oil and gas sector GDP (real growth): - 2019: 3.9 - 2020: -4.9 - 2021: -4.8 - 2022: -7.3 - 2023: -2.0 - 2024 (Proj.): 2.6 - 2025 (Proj.): 3.1 - 2026 (Proj.): 3.1 - 2027 (Proj.): 1.7 - 2028 (Proj.): 1.1 - 2029 (Proj.): 1.0 - Non-oil and gas sector GDP (real growth): - 2019: 3.9 - 2020: 8.9 - 2021: 2.0 - 2022: 4.3 - 2023: 4.5 - 2024 (Proj.): 2.1 - 2025 (Proj.): 2.0 - 2026 (Proj.): 2.1 - 2027 (Proj.): 3.5 - 2028 (Proj.): 4.4 - 2029 (Proj.): 4.7 - Oil production ('000 barrels/day): - 2019: 121 - 2020: 110 - 2021: 107 - 2022: 92 - 2023: 74 - 2024 (Proj.): 84 - 2025 (Proj.): 94 - 2026 (Proj.): 94 - 2027 (Proj.): 99 - 2028 (Proj.): 90 - 2029 (Proj.): 90 - Natural gas output (millions BTUs/day): - 2019: 1,402 - 2020: 1,358 - 2021: 1,253 - 2022: 1,151 - 2023: 1,214 - 2024 (Proj.): 1,226 - 2025 (Proj.): 1,201 - 2026 (Proj.): 1,220 - 2027 (Proj.): 1,277 - 2028 (Proj.): 1,313 - 2029 (Proj.): 1,313 - Average Brunei oil price (U.S. dollars per barrel): - 2019: 68.6 - 2020: 43.3 - 2021: 72.1 - 2022: 107.7 - 2023: 87.1 - 2024 (Proj.): 89.5 - 2025 (Proj.): 83.3 - 2026 (Proj.): 79.9 - 2027 (Proj.): 77.0 - 2028 (Proj.): 75.1 - 2029 (Proj.): 73.8 - Average Brunei gas price (U.S. dollars per million BTU): - 2019: 9.1 - 2020: 6.7 - 2021: 9.1 - 2022: 14.4 - 2023: 10.9 - 2024 (Proj.): 8.6 - 2025 (Proj.): 9.9 - 2026 (Proj.): 8.7 - 2027 (Proj.): 7.8 - 2028 (Proj.): 7.4 - 2029 (Proj.): 7.0 - Consumer prices (period average, percentage change): - 2019: -0.4 - 2020: 1.9 - 2021: 1.7 - 2022: 3.7 - 2023: 0.4 - 2024 (Proj.): 0.5 - 2025 (Proj.): 1.0 - 2026 (Proj.): 1.0 - 2027 (Proj.): 1.0 - 2028 (Proj.): 1.0 - 2029 (Proj.): 1.0 - Public finances: Budgetary Central Government (In percent of GDP) - Total revenue: - 2019: 26.4 - 2020: 12.6 - 2021: 24.0 - 2022: 28.3 - 2023: 17.3 - 2024 (Proj.): 19.3 - 2025 (Proj.): 18.9 - 2026 (Proj.): 17.5 - 2027 (Proj.): 16.3 - 2028 (Proj.): 15.5 - 2029 (Proj.): 15.1 - Oil and gas revenue: - 2019: 19.8 - 2020: 7.7 - 2021: 20.2 - 2022: 24.5 - 2023: 13.0 - 2024 (Proj.): 13.6 - 2025 (Proj.): 13.4 - 2026 (Proj.): 12.2 - 2027 (Proj.): 11.1 - 2028 (Proj.): 10.1 - 2029 (Proj.): 9.5 - Other revenue: - 2019: 6.5 - 2020: 5.0 - 2021: 3.8 - 2022: 3.9 - 2023: 4.3 - 2024 (Proj.): 5.6 - 2025 (Proj.): 5.5 - 2026 (Proj.): 5.3 - 2027 (Proj.): 5.2 - 2028 (Proj.): 5.4 - 2029 (Proj.): 5.6 - Total expenditure: - 2019: 31.9 - 2020: 32.6 - 2021: 29.1 - 2022: 26.7 - 2023: 29.2 - 2024 (Proj.): 29.4 - 2025 (Proj.): 28.6 - 2026 (Proj.): 27.8 - 2027 (Proj.): 26.9 - 2028 (Proj.): 25.9 - 2029 (Proj.): 25.1 - Current expenditure: - 2019: 29.5 - 2020: 31.3 - 2021: 28.0 - 2022: 25.7 - 2023: 27.4 - 2024 (Proj.): 27.0 - 2025 (Proj.): 26.2 - 2026 (Proj.): 25.4 - 2027 (Proj.): 24.5 - 2028 (Proj.): 23.6 - 2029 (Proj.): 22.8 - Capital expenditure: - 2019: 2.4 - 2020: 1.3 - 2021: 1.1 - 2022: 1.0 - 2023: 1.8 - 2024 (Proj.): 2.4 - 2025 (Proj.): 2.3 - 2026 (Proj.): 2.3 - 2027 (Proj.): 2.3 - 2028 (Proj.): 2.3 - 2029 (Proj.): 2.3 - Overall balance: - 2019: -5.6 - 2020: -20.0 - 2021: -5.1 - 2022: 1.6 - 2023: -11.8 - 2024 (Proj.): -10.1 - 2025 (Proj.): -9.6 - 2026 (Proj.): -10.2 - 2027 (Proj.): -10.5 - 2028 (Proj.): -10.4 - 2029 (Proj.): -9.9 - Overall primary balance excluding royalties: - 2019: -22.7 - 2020: -25.8 - 2021: -22.5 - 2022: -19.8 - 2023: -22.6 - 2024 (Proj.): -21.5 - 2025 (Proj.): -20.7 - 2026 (Proj.): -20.2 - 2027 (Proj.): -19.6 - 2028 (Proj.): -18.7 - 2029 (Proj.): -17.7 - Non-oil and Gas Balance (In percent of non-oil and gas GDP): - 2019: -49.5 - 2020: -46.1 - 2021: -44.3 - 2022: -40.2 - 2023: -41.8 - 2024 (Proj.): -39.2 - 2025 (Proj.): -36.5 - 2026 (Proj.): -33.7 - 2027 (Proj.): -31.1 - 2028 (Proj.): -28.6 - 2029 (Proj.): -26.1 - Money and banking (12-month percent change): - Private Sector Credit: - 2019: 2.0 - 2020: 0.2 - 2021: 2.7 - 2022: 6.0 - 2023: 3.9 - 2024 (Proj.): 2.0 - 2025 (Proj.): 2.0 - 2026 (Proj.): 2.0 - 2027 (Proj.): 2.0 - 2028 (Proj.): 2.0 - 2029 (Proj.): 2.0 - Narrow money: - 2019: 6.6 - 2020: 20.8 - 2021: 6.5 - 2022: 1.2 - 2023: 0.7 - 2024 (Proj.): 3.8 - 2025 (Proj.): 3.8 - 2026 (Proj.): 3.8 - 2027 (Proj.): 3.8 - 2028 (Proj.): 3.8 - 2029 (Proj.): 3.8 - Broad money: - 2019: 4.3 - 2020: -0.4 - 2021: 2.7 - 2022: 1.3 - 2023: 2.7 - 2024 (Proj.): 2.6 - 2025 (Proj.): 2.7 - 2026 (Proj.): 2.7 - 2027 (Proj.): 2.7 - 2028 (Proj.): 2.7 - 2029 (Proj.): 2.7 - Balance of Payments (In millions of U.S. dollars): - Goods: - 2019: 2,211 - 2020: 1,359 - 2021: 2,679 - 2022: 5,153 - 2023: 3,808 - 2024 (Proj.): 3,966 - 2025 (Proj.): 4,264 - 2026 (Proj.): 4,121 - 2027 (Proj.): 3,925 - 2028 (Proj.): 4,013 - 2029 (Proj.): 4,131 - Exports: - 2019: 7,210 - 2020: 6,535 - 2021: 11,001 - 2022: 14,130 - 2023: 11,264 - 2024 (Proj.): 11,416 - 2025 (Proj.): 11,987 - 2026 (Proj.): 12,098 - 2027 (Proj.): 12,024 - 2028 (Proj.): 12,390 - 2029 (Proj.): 12,780 - Of which: oil and gas exports: - 2019: 3,244 - 2020: 2,943 - 2021: 4,730 - 2022: 5,660 - 2023: 4,185 - 2024 (Proj.): 3,867 - 2025 (Proj.): 4,387 - 2026 (Proj.): 4,243 - 2027 (Proj.): 3,798 - 2028 (Proj.): 3,668 - 2029 (Proj.): 3,617 - Imports: - 2019: 4,999 - 2020: 5,176 - 2021: 8,322 - 2022: 8,977 - 2023: 7,456 - 2024 (Proj.): 7,450 - 2025 (Proj.): 7,723 - 2026 (Proj.): 7,977 - 2027 (Proj.): 8,099 - 2028 (Proj.): 8,377 - 2029 (Proj.): 8,649 - Services (net): - 2019: -1,189 - 2020: -855 - 2021: -696 - 2022: -848 - 2023: -1,305 - 2024 (Proj.): -1,324 - 2025 (Proj.): -1,271 - 2026 (Proj.): -1,173 - 2027 (Proj.): -1,086 - 2028 (Proj.): -1,029 - 2029 (Proj.): -989 - Primary Income (net): - 2019: 362 - 2020: 360 - 2021: 90 - 2022: -370 - 2023: 194 - 2024 (Proj.): 327 - 2025 (Proj.): 226 - 2026 (Proj.): 193 - 2027 (Proj.): 146 - 2028 (Proj.): 119 - 2029 (Proj.): 83 - Secondary Income (net): - 2019: -490 - 2020: -350 - 2021: -502 - 2022: -671 - 2023: -749 - 2024 (Proj.): -641 - 2025 (Proj.): -687 - 2026 (Proj.): -692 - 2027 (Proj.): -673 - 2028 (Proj.): -684 - 2029 (Proj.): -683 - Current Account Balance: - 2019: 894 - 2020: 514 - 2021: 1,570 - 2022: 3,264 - 2023: 1,949 - 2024 (Proj.): 2,328 - 2025 (Proj.): 2,532 - 2026 (Proj.): 2,448 - 2027 (Proj.): 2,311 - 2028 (Proj.): 2,419 - 2029 (Proj.): 2,541 - Current Account Balance (in percent of GDP): - 2019: 6.6 - 2020: 4.3 - 2021: 11.2 - 2022: 19.6 - 2023: 12.9 - 2024 (Proj.): 15.0 - 2025 (Proj.): 15.5 - 2026 (Proj.): 14.4 - 2027 (Proj.): 13.0 - 2028 (Proj.): 13.0 - 2029 (Proj.): 13.0 - Gross Official Reserves: - 2019: 4,273 - 2020: 3,997 - 2021: 4,980 - 2022: 5,035 - 2023: 4,485 - 2024 (Proj.): 4,583 - 2025 (Proj.): 4,682 - 2026 (Proj.): 4,780 - 2027 (Proj.): 4,879 - 2028 (Proj.): 4,977 - 2029 (Proj.): 5,075 - In months of next year's imports of goods and services: - 2019: 8.0 - 2020: 5.2 - 2021: 5.9 - 2022: 6.6 - 2023: 5.9 - 2024 (Proj.): 5.9 - 2025 (Proj.): 5.9 - 2026 (Proj.): 5.9 - 2027 (Proj.): 5.9 - 2028 (Proj.): 5.9 - 2029 (Proj.): 5.9 - Exchange rates: - Brunei dollars per U.S. dollar (period average): - 2019: 1.36 - 2020: 1.38 - 2021: 1.34 - 2022: 1.38 - 2023: 1.34 - 2024: ... - Brunei dollar per U.S. dollar (end of period): - 2019: 1.35 - 2020: 1.34 - 2021: 1.36 - 2022: 1.35 - 2023: 1.33 - 2024: ... ### Financial stability and structural priorities - Continue prudential measures; maintain NPL standards despite declining oil prices posing risks. - Implement Basel III standards for better liquidity management by the end of 2024. - Develop a long-term sukuk market, green taxonomy, and unify disclosure standards to deepen markets and support long-term green projects. - Attract FDI and PPPs by supporting first generation reforms: enhanced trade facilitation, deeper regulatory and governance reforms. - Strengthen human capital to address AI-related challenges and leverage opportunities. - Implement a comprehensive transition plan with carbon pricing and energy subsidy reforms while developing the non-O&G sector. *Sources: Data provided by the Brunei authorities; and Fund staff estimates and projections.* ### 7. Brunei's current account (CA) surplus narrowed significantly to 12.9 (19.6) percent of ### 7. Brunei's current account (CA) surplus narrowed significantly to 12.9 (19.6) percent of ### External sector developments - Current account (CA) surplus: 12.9 (19.6) percent of GDP in 2023 (2022). - Drivers of CA narrowing: - Lower O&G exports due to lower O&G prices and production and planned maintenance at the oil refinery and petroleum plant. - Higher service imports and net income outflows. - Exports growth slowed; imports of raw materials, mainly mineral fuels, also declined reflecting lower feedstock prices. - Financial account flows: - Significant outflows, including increased offshore lending by domestic banks. - Prompted a survey to better gauge trends in errors and omissions, and payables/receivables. - International reserves: - Declined modestly. - International reserves (excluding gold) assessed adequate at around 185 percent of the Fund’s reserve adequacy (ARA) metric in 2023. - External position: - Weaker-than-expected CA performance reflected in a substantially weaker external position than the level implied by fundamentals and desirable policy settings. ### Fiscal developments and public finances - Monetary/fiscal interactions: - Monetary data suggests a large draw down of government deposit in 2023 (8.9 percent of GDP), in part reflected in decline of central bank reserves. - Fiscal aggregates (Fiscal year: April-March; Percent of GDP; millions of BND): - Revenue: 26.4 (2019/20), 12.6 (2020/21), 24.0 (2021/22), 28.3 (2022/23), 17.3 (2023/24). - Oil & Gas revenue: 19.8, 7.7, 20.2, 24.5, 13.0 (same fiscal years). - Non-Oil & Gas revenue: 6.5, 5.0, 3.8, 3.9, 4.3 (same fiscal years). - Expenditure: 31.9, 32.6, 29.1, 26.7, 29.2 (same fiscal years). - Current expenditure: 29.5, 31.3, 28.0, 25.7, 27.4 (same fiscal years). - Capital expenditure: 2.4, 1.3, 1.1, 1.0, 1.8 (same fiscal years). - Overall Balance 2/: -5.6, -20.0, -5.1, 1.6, -11.8 (same fiscal years). - Non-O&G Balance (% of Non-O&G GDP): -49.5, -46.1, -44.3, -40.2, -41.8 (same fiscal years). - Nominal GDP (millions of BND): 18,385, 16,241, 19,867, 22,332, 20,391 (same fiscal years). - Nominal non-O&G GDP (millions of BND): 8,418, 9,098, 10,103, 11,003, 11,027 (same fiscal years). - Fiscal stance and financing: - Near-term fiscal stance appropriate given narrowing output gap; authorities frontloaded fiscal consolidation in FY 2022, later unwound in FY 2023/24, and expected to tighten in FY 2024/25. - As a share of GDP, overall fiscal deficit projected to shrink by 1.7 ppts in FY2024/25 due to continued increase in O&G production and related tax revenues. - Overall deficit expected to be financed by continued drawdown of the Consolidated Fund (CF). - Revenue composition and mobilization: - Share of revenues from O&G sectors in total revenue: 75.0 percent in FY2023/24. - Non-O&G sector share in nominal GDP: 26.2 percent in 2008 to 53.6 percent in 2023. - Non-O&G share in total revenue: 7.3 percent in FY2008/09 to 25.0 percent in FY2023/24. - Estimated tax revenue to GDP ratio: around 6 percent in FY2023/24; average tax revenue FY2020-FY2023 was 7.8 percent of GDP. - Recommended revenue measures: reducing tax exemptions, implementing a goods and services tax (GST) and personal income tax, adjusting tax rates (including property tax), expanding excise taxes, carbon pricing, phasing out fossil fuel subsidies, and digitalizing the tax system. - Carbon pricing potential: $50 per tonne carbon tax by 2030 could generate 1.6-7.2 percent of GDP above the baseline in 2030. - Expenditure rationalization: - Downward rigidity of spending noted; large public footprint and high public wage bill relative to regional peers. - Recommendations: wage bill rationalization through attrition and tightening temporary positions; targeting broad-based subsidies (energy, housing, utilities) to secure resources for RKN 12 development spending. - Fiscal rules and frameworks: - Steps toward establishing a medium-term fiscal framework (MTFF) and Fiscal Consolidation Programme (FCP) introduced in FY 2018/2019; update and clear fiscal targets recommended. - Staff analysis under current policies: PIH norm implies need for further fiscal consolidation of cumulative 9-10 percent of non-O&G GDP between 2024-2029 relative to baseline. - Alternative PIH anchor under Net Zero Emissions (NZE) by 2050 scenario implies higher adjustment needs, about 12 ppts. - Broadening fiscal coverage recommended to include extrabudgetary funds, government-linked companies (GLCs), joint ventures, PPPs, and contingent liabilities; integrate climate-related expenditure and fiscal risk analysis. ### Banking sector and financial intermediation - Banking sector soundness: - Capital ratio: around 21 percent of risk-weighted assets in 2023 (regulatory requirement 10 percent). - Gross NPL: declined from 3.3 percent in 2022 to 2.6 percent in 2023. - Banks’ return on assets (before tax): improved to 2.1 percent in 2023 from 1.3 percent in 2022. - Liquidity: abundant and funded mostly by domestic deposits. - Lending patterns: - Foreign (offshore) lending surged: offshore loans by Brunei-based banks to Bruneian corporates rose by 64 percent year-on-year by end-2023. - Offshore assets have been relatively stable around 51-53 percent of total assets over the past five years. - Domestic credit growth: slowed to 2.0 percent year-on-year in 2023 from 6 percent. - Corporate credit growth: slowed to 3.5 percent from 8.8 percent. - Household credit (bank and finance company loans): picked up to 5 percent year-on-year. - Authorities monitoring acceleration of personal loan growth and continue to cap total debt service ratio at 60 percent. - Deposits and government exposure: - Around 12.3 percent of deposits are from the government as of March 2024, declining from 13.9 (32.2) percent in December 2023 (2022). - Counterparty quality offshore: - 82 (11) percent of industry counterparties offshore have a rating of A- (BB) and above. ### Outlook and risks - Growth projections: - Real GDP projected to increase by around 2.4 percent in 2024, supported by O&G production from the new offshore oil field. - Domestic non-tradable sector growth expected to plateau; downstream sector and investment activities expected to increase due to oil refinery and petrochemical plant Phase II investments and budgeted developmental spending. - Household consumption remains a key growth driver. - Estimated output gap expected to close by 2025; medium-term growth expected to be impacted slightly by the China slowdown. - Inflation: - Projected to stay broadly unchanged at an average of 0.5 percent in 2024. - Factors keeping inflation under control: easing global supply chains, Brunei's currency board with the Singapore dollar, and administered prices covering 16.4 percent of CPI items. - Current account outlook: - CA surplus expected to increase to around 15 percent of GDP in 2024, supported by improvements in the income account and non-O&G exports, amidst a reduced fiscal deficit and corresponding lower imports. - Medium-term: lower export revenues from softer O&G prices would be partly mitigated by new deepwater oilfield production, downstream pick-up, and services exports (tourist arrivals more than doubled in 2023 and projected to reach pre-pandemic levels by 2025). - Imports expected to stay buoyant as the economy rebounds. - Risks: - Downside risks: supply chain disruptions from heightened geopolitical tensions; negative spillovers from further growth slowdown in China; food price spikes due to extreme weather shocks; disorderly transition to renewable energy under global decarbonization pressures (medium-to longer-term). - Upside possibilities: structural reforms and technological advancement including artificial intelligence (AI) boosting productivity; higher O&G prices and O&G discoveries accelerating growth. ### Authorities’ views and policy actions - Authorities’ outlook: - Authorities concur broadly with staff’s assessment; expect slightly higher growth driven by rebound in upstream and downstream O&G and growth in transport and hospitality. - Expect two new projects to start in 2024, alongside the Salman field (operational since Q4 2023). No major maintenance for the oil refinery and petroleum plant planned in 3-4 years. - Committed to diversifying the economy and view green transition as both risk and opportunity. - Fiscal policy and reform actions underway: - Initiatives: launching non-subsidized premium fuel, implementing smart meters, discussing tariff reforms, digitizing the National Welfare System to better target support. - Enhancing fiscal planning: establishing MTFF and fiscal rules; reviewing the FCP with greater focus on reducing the non-O&G balance and improving public service delivery via corporatization, privatization, and PPPs. - Strengthening financial management: consolidating subsidy data, implementing Treasury Accounting Financial Information Systems (TAFIS 2.0) with revised Chart of Accounts (COA) since April 2024; enhanced virement rules for line ministries. - Ongoing work on economic diversification through Brunei Darussalam Economic Blueprint to achieve Brunei Vision 2035. _Source: Brunei authorities, IMF staff estimates, and IMF staff analysis contained in the supplied content._ ### 23. The currency board arrangement with Singapore is sound and has played a key role in ### 1brnea2024001-print-pdf - 23. The currency board arrangement with Singapore is sound and has played a key role in ### Monetary framework and exchange rate arrangement - The currency board arrangement with Singapore "is sound and has played a key role in supporting Brunei's macroeconomic and financial sector stability." - The arrangement "has helped to stabilize exchange rate fluctuations and minimize the impact of imported inflation to the domestic economy." - The currency board is safeguarded by the BDCB adhering to "the coverage of all issued liabilities in Brunei dollars (BND) by foreign currency, and with no monetary financing." ### Monetary operations and liquidity management - Recommendation: "Improving monetary operations is recommended to enhance interest rate transmission and facilitate financial deepening." - Authorities actions and reforms: - "Widened the interest corridor to be equal or larger than the MAS corridor." - "Continue to align interest rates with Singapore through the standing facility rate changes, while disconnecting the limit on the standing lending facility from collateral." - "I-bills are now included as eligible assets in the Asset Maintenance Ratio (AMR)." - "A dedicated website to enhance communication on monetary frameworks implementation has been established." - "Increasing issuance of I-bills to allow more active management of liquidity to strengthen the signal from the overnight policy rate to retail rates is underway." - "Absorption of structural liquidity through the lock-in of the proceeds from the Brunei Government Sukuk in the Treasury account with the BDCB will enhance liquidity management." - Medium-term capacity building recommendation: "BDCB is encouraged to build internal capacity in liquidity forecasting to calibrate I-Bill issuance and consider establishing a single treasury account." - As of June 2024: "BDCB completed four high priority, near-term reforms" in liquidity/monetary operations. ### Financial sector resilience and prudential framework - Assessment: "The financial sector has strong capital buffers and abundant liquidity, and systemic risk is assessed to be contained." - Risks and vigilance: - "The rapid growth in foreign lending by Bruneian banks, (¶9), suggests the need for diligent market risk management." - "Interest rate risks and liquidity tail risks related to further rapid increase in interest rates and the unavailability of liquidity placed offshore in times of extreme stress, appear to have improved since last year and can be mitigated by the existing strong capital and liquidity buffers." - Regulatory actions and plans: - "BDCB continues its efforts to strengthen prudential regulatory framework for the banking industry and is expected to formally implement the Basel III liquidity coverage ratios (LCR) before end-2024." - "Basel III liquidity measures are already being deployed internally in some banks, particularly in Domestic Systemically Important Banks (DSIBs)." - Historical prudential measures referenced: - "Capping the Total Debt Service Ratio (2015)." - "Assessing the unsecured personal loan exposure (2015)." - "Enhancing and maintaining NPL definitions (2018)." - Additional supervisory recommendations: "Further strengthening risk-based supervision, including enhanced stress testing, and for climate transition and physical risks, could be considered." - Note on Basel II/III implementation: "While all three pillars of the Basel II have been implemented including, 10 percent minimum CAR, annual submission of Capital Adequacy Assessment Process (ICAAP) and provision of enhanced risk disclosures and capital management, along with additional capital buffer requirements for DSIBs. Basel III Liquidity Coverage Ratio (LCR) measures is planned to be implemented by end-2024. The 1st and 2nd rounds consultation on LCRs with the banks were completed in January 2023 and November 2023, respectively." ### Financial market development and market structure - Constraints: "Excess liquidity hampers Brunei's interbank market development, crucial for financial sector deepening." - Ongoing and planned measures (six further measures under work): - "(i) establishing a Master legal documentation for interbank placements, Commodity Murabaha, and Unrestricted Investment Wakalah Agreements to reduce market segmentation" - "(ii) stepping up in BDCB I-Bills issuance" - "(iii) better aligning overnight standing facility (deposit)" - "(iv) establishing a Brunei reference rate" - Market deepening and payment systems: - In April 2024, Brunei "joined the Regional Payment Connectivity (RPC) to foster payment connectivity with participating Asian peers." - "An ongoing digital payment hub is integrating existing payment systems." - "Guidelines for issuance of debentures in 2022, and amended in January 2024, are expected to facilitate green bond issuance, but more is needed on green taxonomy and unifying disclosure standards." - "Islamic investment regulations were legislated in September 2023, but more effort is needed to enhance the business environment for financial growth, including deepening sukuk markets." - Authorities exploring sukuk market development: "They acknowledged the need to strengthen collaboration between the BDCB and the MOFE to introduce sukuks, to promote an investment culture within the local market. Consideration is being given to develop a long-term Sukuk market to support savings and finance long-term projects, aiming to bolster Brunei's financial sector." ### AML/CFT and fintech oversight - Ongoing reforms: "The authorities are taking steps to enhance the AML/CFT framework and its implementation." - Legal and regulatory changes: - "Two laws were amended in 2022, namely the Anti-Terrorism Order and Anti-Terrorism (Terrorist Financing) Regulations and the Criminal Asset Recovery Order." - "BDCB introduced provisions requiring oversight of virtual assets and virtual asset service providers (VASPs) in line with the Financial Action Task Force’s (FATF) Recommendation 15, through amendments to the Money-Changing and Remittance Business Act and Notice on Requirements for Payment Systems and issuance of new Guidelines on Offering Trading of Security Tokens." - Authorities' commitment: "The authorities reaffirmed their commitment to continue to implement the recommended actions in the Asia Pacific Group on Money Laundering (APG) Mutual Evaluation Report." ### Structural reforms to boost productivity and diversification - Strategic advice: "Structural reforms can help to improve Brunei Darussalam’s long-term productivity." - IMF Staff Discussion Note guidance: "Prioritizing first-generation reforms—governance, external sector, and business regulation—before implementing second-generation reforms like domestic finance and labor market changes for better job creation." - Expected benefits: "This approach can yield significant upfront gains in output growth, facilitate the green transition, and balance growth with climate concerns." - Remaining structural challenges and recommendations: - "Brunei has a low labor force participation relative to peers." - "Challenges remain with youth unemployment, and their potential exposure to job displacement by adoption of AI technology." - "Structural challenges in the regulatory framework are limiting FDIs and PPPs into Brunei." - Recommended priorities: "Promoting trade through rationalizing non-tariff barriers and import restrictions on intangible goods, and improving trade facilitation, specifically by simplifying the export/import documentation process, and improving the timeliness of appeal procedures." - "Reducing the regulatory burden for firms such as business licensing and permits, reforming taxes and subsidies that create distortive effects in the product market, and lowering market dominance of large firms, especially GLCs." - "Efficient property rights transfers and commercial case resolutions would further enhance investors’ confidence in the domestic economy." - Specific performance and exposure data: - "Half of Brunei’s labor market is highly exposed to AI, slightly higher than world average (40 percent), yet lower than AEs such as Singapore (77 percent)." - "About half of AI exposure has high complementarity ... while other half has low complementarity." - "40 percent of youth (15-24 years old) [are] more likely to be employed in occupations that are highly susceptible to displacement by AI, compared to 30 percent of their peers (25+ years old)." - "A disproportionally low share of youth is employed in occupations with high exposure and high complementarity to AI (8 percent, compared to 28 percent for 25+ years old)." - Authorities' views on diversification: "Brunei is pushing economic diversification with plans like Brunei Vision 2035 and enhancing growth through downstream expansion and related activities." Government commitments include "reaching its net zero emissions goal by 2050" and preparing "a National Adaptation Plan for 2025 and a Climate Vulnerability Assessment." ### Data issues, dissemination, and capacity building - Data shortcomings: "Data provided to the Fund has some shortcomings that somewhat hamper surveillance and quality should continue to improve (Appendix IV)." - Key gaps and recommendations: - Need for "granular, timely, frequent, and consistent reporting, especially for fiscal and external sectors." - "The underlying CPI consumption basket is dated and may be hampering the quality of inflation data and trends, especially post-COVID." - "Lack of granularity in external sector statistics, and large errors and omissions limit data accuracy and narrow the scope for detailed discussion on sources of capital outflows." - "Limited information on activities of extrabudgetary funds, GLCs, joint ventures and PPPs constrain fiscal risk analysis." - Recommendations: "Providing further breakdowns and improved classifications for BOP statistics, including through survey data, continuing efforts to broaden the dissemination of IIP data, as well as providing more comprehensive data for extrabudgetary funds, GLCs, joint ventures, and PPPs will help to improve surveillance." - Authorities' planned actions and TA engagement: - Plans to "improve the timeliness and granularity of their e-GDDS fiscal and external data submissions." - Working on "a survey to improve classification of errors and omissions and receivables/payables in BOP statistics." - "Planning to update the 2015 CPI consumption basket based on the ongoing household expenditure survey (HES)." - Working with the Fund "towards aligning a new set of fiscal charts of accounts (COA) with the GFSM 2014." - Fund assistance on "GDP rebasing and enhancing national income data quality." - Timing and recent developments: Authorities noted newly introduced IMF data provision requirements "to become effective only from late 2025" and the Data Adequacy Assessment (DAA) for the AIV 2024 Consultation. *Source: Excerpt from 1brnea2024001-print-pdf (IMF staff report chapters 23–35).* ### 36. Growth rebounded moderately in 2023. The stronger-than-expected growth turnaround ### Growth rebounded moderately in 2023. The stronger-than-expected growth turnaround ### Growth, output gap, and inflation - Growth rebounded moderately in 2023, supported by a new O&G field coming to stream in late 2023, a high interest rate environment and post-pandemic momentum boosting finance, transport, and hospitality. - Persistent O&G production challenges and maintenance related disruptions in downstream activities, along with lower O&G prices, weakened the fiscal and external positions in 2023. - The external position for 2023 remained substantially weaker than suggested by fundamentals and desirable policies. - The output gap is assessed to be negative. - Disinflation continued mainly due to easing supply chain disruptions and the softening of commodity prices, aided by continuing large scale subsidies and price controls. ### Fiscal stance, risks, and recommendations - The narrowing output gap, O&G revenue uncertainty and long-term decarbonization trends warrant a prudent fiscal stance, while protecting the vulnerable and public investment. - Use of fiscal buffers in FY 2023/24 was appropriate to support economic recovery; restoring fiscal buffers through growth-friendly fiscal consolidation should be prioritized going forward. - Policy measures to support consolidation include: - enhanced revenue generation, - a possible low-rate carbon tax, - expenditure rationalization, including via more targeted subsidies. - These efforts should be guided by a fiscal consolidation plan with clear fiscal targets. - Plans recommended: establish a MTFF and fiscal anchors, strengthen fiscal risk management and transparency. - Fiscal figures from Table 2 (selected entries, all in millions of Brunei dollars unless otherwise noted): - Revenue: 2023/24 Est. 3,532 - Tax: 2023/24 Est. 1,253 - Oil and gas (tax): 2023/24 Est. 883 - Other (tax): 2023/24 Est. 370 - Nontax revenue: 2023/24 Est. 2,279 - Oil and gas (nontax): 2023/24 Est. 1,767 - Other (nontax): 2023/24 Est. 512 - Expenditure: 2023/24 Est. 5,946 - Current: 2023/24 Est. 5,580 - Wages and salaries: 2023/24 Est. 2,085 - Other: 2023/24 Est. 3,494 - Of which: Royalty payment: 2023/24 Est. 458 - Capital: 2023/24 Est. 367 - Of which: Development expenditure: 2023/24 Est. 367 - Overall balance 2/: 2023/24 Est. -2,414 - Non-oil and gas overall balance: 2023/24 Est. -4,606 - Nominal GDP (memorandum): 2023/24 Est. 20,391 - Non-oil and gas GDP (memorandum): 2023/24 Est. 11,027 - Fiscal ratios (selected percent of GDP, 2023/24): - Revenue: 17.3 - Tax: 6.1 - Oil and gas (tax): 4.3 - Other (tax): 1.8 - Nontax revenue: 11.2 - Oil and gas (nontax): 8.7 - Other (nontax): 2.5 - Expenditure: 29.2 - Current: 27.4 - Wages and salaries: 10.2 - Other: 17.1 - Royalty payment: 2.2 - Capital: 1.8 - Development expenditure: 1.8 - Overall balance 2/: -11.8 - Non-oil and gas overall balance: -22.6 - Non-oil and gas overall balance (in percent of non-oil and gas GDP): -41.8 ### Monetary policy, currency board, and operations - The currency board arrangement with Singapore is sound and has played a key role in supporting Brunei's macroeconomic and financial sector stability. - Improvements underway or recommended: - include Singapore's interbank transactions in analysis to understand influence of Singapore's policy rates since January 2024, - continue to narrow the corridor by raising the SFDR, - integrate I-bills into the Asset Maintenance Ratio, - launch a website for better communication on monetary policies. - Enhance inter-agency cooperation regarding issuance and management of sukuks. - Over the medium-term, BDCB is encouraged to: - build internal capacity in liquidity forecasting to calibrate issuance of the I-bills, - consider establishing a single treasury account. - Monetary and financial indicators (selected): - Standing Facility Lending rates raised since 2022 in line with rates in Singapore (no numeric rate provided in text). - Broad money growth: 2023 (Table 6) 2.7 percent (M2, percent change, y/y). - Private sector credit growth: 2023 3.9 percent (percent change, y/y). ### Financial sector resilience and recommendations - The financial sector remained stable with strong capital and liquidity buffers; systemic risk is assessed to be contained. - Monitoring needs: - careful tracking of credit growth in both offshore and domestic personal loans as declining oil prices could pose risks despite low NPLs. - Ensure foreign loans continue to be invested in highly credit-rated assets to mitigate credit risk. - Prudential measures recommended for domestic lending: - cap the Total Debt Service Ratio, - assess unsecured personal loan exposure, - maintain NPL standards. - Authorities encouraged to implement Basel III standards for better liquidity management by end-2024. - Implementation of stress tests is recommended, including consideration of climate transition and physical risk stress testing. - Further steps to deepen markets and support long-term green projects: - strengthen prudential frameworks, - develop a long-term sukuk market, - create a green taxonomy and unify disclosure standards, - improve AML/CFT effectiveness. - Financial Soundness Indicators (Table 5, Q4 values where indicated): - Regulatory capital to risk-weighted assets: 2023 21.1 (percent) - Tier 1 capital to risk weighted assets: 2023 21.4 (percent) - NPL to total loans: 2023 2.6 (percent) - Provision coverage (specific provisions to total NPLs): 2023 37.2 (percent) - Return on assets (before tax) 2023 2.1 (percent) - Return on equity (after tax) 2023 13.7 (percent) - Liquid assets to total assets 2023 43.6 (percent) - Loans to deposits ratio 2023 43.7 (percent) ### Structural reforms and climate transition - Authorities’ commitment to ambitious and sustained structural reforms is critical to ensure growth and diversification, including transitioning to a low-carbon economy. - Reaching net zero emissions goal by 2050 will require continued development of the non-O&G sector, including adoption of green technologies. - Other priorities to facilitate FDI and PPPs: - continued skill development, - addressing AI-related challenges, - closing structural gaps in first-generation reform areas: external sector trade facilitation, improving business regulation, and governance. - Completing the 2025 National Adaptation Plan and a Climate Vulnerability Assessment should support prioritization of adaptation strategies. ### Data, surveillance, and transparency - Data provided to the Fund has some shortcomings that somewhat hamper surveillance; data quality should be strengthened. - Steps needed to close identified data gaps in national income, prices, external and fiscal sectors. - Recommended efforts: - improve external sector data through a survey to better gauge trends in errors and omissions, and payables/receivables, - strengthen public financial management (PFM) to build more transparent and accountable fiscal systems and align further with GFSM (2014), - enhance dissemination via the Fund’s e-GDDS portal. - It is expected that the next Article IV consultation with Brunei Darussalam will be held on the standard 12-month cycle. ### Selected external and vulnerability indicators (from Table 6) - Current account balance (in millions of U.S. dollars): - 2019: 894 - 2020: 514 - 2021: 1,570 - 2022: 3,264 - 2023: 1,948 - 2024 Proj.: 2,328 - 2025 Proj.: 2,532 - Current account balance (in percent of GDP): - 2019: 6.6 - 2020: 4.3 - 2021: 11.2 - 2022: 19.6 - 2023: 12.9 - 2024 Proj.: 15.0 - 2025 Proj.: 15.5 - Gross official reserves (in millions of U.S. dollars): - 2019: 4,273 - 2020: 3,997 - 2021: 4,980 - 2022: 5,035 - 2023: 4,485 - 2024 Proj.: 4,583 - 2025 Proj.: 4,682 - Gross official reserves (in months of next year's imports of goods and services): - 2019: 8.0 - 2020: 5.2 - 2021: 5.9 - 2022: 6.6 - 2023: 5.9 - 2024 Proj.: 5.9 - 2025 Proj.: 5.9 *Source: Content provided in the IMF staff report excerpt for Brunei Darussalam.* ### Annex I. External Sector Assessment ### Annex I. External Sector Assessment ### Overall assessment - The external position of Brunei in 2023 is estimated to remain substantially weaker than the level implied by fundamentals and desirable policies. - The current account (CA) surplus in 2023 decreased significantly relative to 2022 owing to the decline in O&G prices and higher service imports. - The current account balance is projected to improve in 2024 as net income outflows are expected to decline and non-oil and gas (non-O&G) exports are expected to increase slightly. - Over the medium term, the CA surplus is expected to stabilize at around 13 percent of GDP as downstream activities mature and fiscal consolidation in non-O&G balances keep pace. - Substantial international and fiscal reserves offer protection against external shocks, and the currency peg to the Singapore dollar continues to be a suitable and reliable nominal anchor. ### Current account — background and recent evolution - CA surplus path: secular decline until 2020 following downward O&G production; CA increased after 2020 due to commodity price increases and shrinkage of a deficit in non-O&G CA balance after launch of oil refineries and petrochemical operations in November 2019. - 2023 CA outcome: - Current account surplus reached 12.9 percent of GDP in 2023, a decline from 19.6 percent of GDP in 2022. - Exports of crude oil and LNG decreased by 24 percent y/y in 2023, mainly due to decreases in O&G prices. - Exports of O&G downstream products decreased by 23 percent in 2023 driven by closures due to maintenance of oil refineries and petrochemical downstream activities. - Imports value declined by 21 percent in 2023. - Imported mineral fuels and chemicals constituted 70 percent of total imports in 2023 and decreased by 24 percent y/y. - Service imports increased by 54 percent y/y, mainly driven by rebound in tourism for Bruneians travelling abroad post-COVID. - Projections: - CA balance projected to improve in 2024 as net outflows in the income account decline and non-O&G exports increase slightly. - Medium-term CA surplus expected to stabilize at around 13.0 percent of GDP as export products diversify. - Note: IMF staff projection based on International Merchandise Trade Statistics as of Dec 2023. ### Current account — assessment (EBA-Lite 3.0) - EBA-Lite 3.0 estimates: - Adjusted current account balance: 12.2 percent of GDP in 2023 (adjusted for cyclical contributions). - Current account norm: 20.0 percent of GDP. - Implied current account gap: -7.7 percent of GDP (adjusted CA balance substantially weaker than level implied by fundamentals under macro balance approach). - Policy implication: Assessment aligns with need for growth-friendly fiscal consolidation based on a non-O&G fiscal balance anchor to support economic diversification and greening. ### Real exchange rate - Background: - Real effective exchange rate (REER) has appreciated since 2022 after prior trend declines. - Appreciation largely driven by Singapore’s NEER appreciation (Brunei dollar pegged to Singapore dollar), while adjusting for a lower inflation rate. - Assessment: - REER model indicates a REER gap of 1.9 percent which implies a CA gap of -0.8 percent of GDP in 2023. - Maintaining the peg to the Singapore dollar is considered fitting: provides a dependable nominal anchor, anchors inflation expectations, enables fund managers to access Singapore’s financial markets, and aids diversification and FDI attraction. ### Capital flows - Background: - Capital inflows historically driven by FDI, with significant rise between 2017 and 2020 supporting O&G downstream oil refineries and petrochemical project. - FDI inflow (net) became negative in 2022 and 2023 partly due to redemptions of FDI-related debt instruments after project operations commenced. - Baseline outlook for FDI is modest; downstream sector expected to grow further and anticipated new FDI project of oil refineries and petrochemical industries can contribute to a small and gradual increase in FDI inflows in the medium term. - Capital outflows reflect domestic banks’ holdings of foreign assets, including excess liquidity placed abroad. - Assessment and risks: - Domestic banks’ large holding of foreign assets, mainly in Singapore, constitutes a risk; authorities’ monitoring through forward-looking liquidity and interest rate risk stress tests is important. - The currency board arrangement with the Singapore dollar is a mitigating factor. - Supervisory and regulatory developments: - Since 2019 supervisors have engaged in more risk-based supervision and initiated macro stress tests. - Domestic systemically important banks (D-SIBs) were designated in 2020 and subject to additional policy measures like Higher Loss Absorbency (HLA) capital requirements since 2023. - Plans underway to implement Basel III liquidity standards and other framework elements in phases by 2024. ### FX intervention and reserves level - Reserves and coverage (2023): - International reserves (excluding gold) estimated at USD 4.1 billion in 2023. - Reserve coverage equivalent to 5.4 months of imports and 33 percent of broad money. - Reserves around 185 percent of the Fund’s composite metric, exceeding the recommended 100–150 percent adequacy range. - Recent dynamics: - Net lending in the financial account (reflecting decrease in net FDI inflows) increased banks’ offshore loans funded in part by drawdown of unremunerated excess reserve holdings at the central bank, contributing to a modest decline in international reserves alongside lower oil prices. - Assessment: - Official reserve level remains adequate and in line with sustaining the currency board arrangement with Singapore. - Reserves are complemented by large sovereign wealth fund assets. - Brunei’s reserve coverage is in line with other countries that heavily rely on O&G exports. - Operational arrangements: - Currency board arrangement: BDCB adheres to coverage of all issued liabilities in BND by foreign currency; monitors an internal ratio Total External Assets over the Monetary Base in addition to Currency Fund over Currency in Circulation (CIC). - Central bank offers conversion of BND and SGD at par through a standing funding window in BND. ### Risk Assessment Matrix — External risks (selected entries) - Intensification of regional conflict(s) - Likelihood: High - Expected impact: Medium - Expected effect: Supply-chain disruption increases import prices and inflation; higher energy prices improve fiscal and external balances. - Policy response: - Expand fiscal reserves along with continuous fiscal consolidation, - Accelerate food production, - Support vulnerable households through cash transfers while allowing for international prices to pass through to domestic consumers. - Abrupt global slowdown - Likelihood: Medium - Expected impact: Medium - Expected effect: Fiscal and external balances negatively affected by lower external demand and fuel prices; FDI inflow reduced. - Policy response: - Accelerate diversification of export products, - Improve business climate to attract foreign investments, - Provide targeted and temporary financial and fiscal support to firms and households. - Commodity price volatility - Likelihood: High - Expected impact: High - Expected effect: High energy prices improve fiscal and external balances; surging food prices heighten inflation and strain vulnerable households. - Policy response: - Expand fiscal reserves with continuous fiscal consolidation, - Accelerate food production, and support needy households. - Deepening geo-economic fragmentation - Likelihood: High - Expected impact: Medium - Expected effect: Supply disruptions and weaker confidence can undermine investment; potential increase in commodity prices depending on degree of fragmentation. - Policy response: - Build fiscal buffers with fiscal consolidation that provides strong protections to those in needs, - Increase public investment to promote economic diversification. - Extreme climate events - Likelihood: Medium - Expected impact: Medium - Expected effect: Inflationary pressure from high food prices; disruptions in economic activities and physical damages to infrastructure; increased spending for recovery. - Policy response: - Accelerate food production, and support needy households. - Disorderly energy transition - Likelihood: Medium - Expected impact: Medium - Expected effect: Sudden drop of energy prices deteriorates fiscal and external balances. - Policy response: - Expand fiscal reserves along with continuous fiscal consolidation, - Accelerate economic diversification, - Implement energy transition based on a well-planned scenario. ### Risk Assessment Matrix — Domestic risks (selected entries) - Unexpected variations in energy production - Likelihood: Medium - Expected impact: High - Expected effect: Declined (Increased) production lowers (augments) fiscal revenues and exports. - Policy response: - Diversify the economy and secure revenue from non-O&G sector, - Refrain from procyclical fiscal policy and build additional fiscal reserves, - Strengthen contingency planning. - Accelerated productivity improvement (including AI adoption) - Likelihood: Medium - Expected impact: Medium - Expected effect: Stronger growth and diversification momentum by productivity boost; AI adoption leads to economic and social challenges via employment channel. - Policy response: - Accelerate economic diversification, - Attract more FDI by improving business environment, - Decrease low-skilled jobs. ### Status of staff advice in 2023 Article IV Consultation (selected policy areas) - Fiscal policy - Staff advice: Maintain fiscal support in near term while resume growth-friendly consolidation for the longer term by rationalizing wage bill and pensions, targeting subsidies, accelerating revenue mobilization (including through carbon pricing), and promoting corporatization and privatization with strengthened fiscal frameworks and improved public financial management. - Policy actions: Government continued fiscal support by expanding fiscal deficits and increased development expenditure (notably Security and Public Utilities); no major changes in tax and subsidy measures announced; corporatization/privatization efforts delayed; authorities requested a high-level seminar on fiscal framework and a week-long workshop covering carbon pricing using FAD’s CPAT module. - Financial sector policies - Staff advice: Further develop financial sector while strengthening risk-based regulatory, supervision and macroprudential framework; deepen macro-stress testing TA recommendations and prepare climate exposure data inventory; strengthen AML/CFT framework. - Policy actions: - Authorities welcomed 2023 IMFTA recommendations on liquidity management and interbank market development; plan to implement Basel III liquidity standard between 2023 and 2024 and other Basel III elements in phased way. - Measures in progress to develop secondary market of government sukuks and I-bills, encourage issuance of corporate bonds/sukuks, and establish a stock exchange. - D-SIBs identified for 2023 subject to additional measures (HLA capital requirements). - Two laws amended in 2022 (Anti-Terrorism Order and Anti-Terrorism (Terrorist Financing) Regulations; Criminal Asset Recovery Order). - BDCB introduced oversight provisions for virtual assets via amendments to Money Changing and Remittance Business Act and related guidelines in line with FATF Recommendation 15 as determined by APG Mutual Evaluation. - Structural policies - Staff advice: Further diversify the economy and raise growth potential by developing human capital and accelerating digitalization while enhancing Public-Private Partnerships (PPPs). - Policy actions: - Government launched 12th National Development Plan (RKN 12) with a five-year allocation of $4 billion for 2024-29, including projects for digitalization, diversification (tourism, livestock, agriculture, aquaculture), and human capital development (National Education Management System, building education facilities, Miftaahun Najaah Scheme). - Signed an Implementation Agreement for the Phase 2 Development Project of Hengyi Industries in November 2023; PPP progress slow; pilot for hydrogen fuel completed; groundwork for a voluntary carbon market being laid. - Data issues - Staff advice: Improve data compilation and reporting. - Policy actions: Authorities committed to publishing National Summary Data Page (NSDP) regularly and adhering to IMF e-GDDS; requested IMF TA on National Account Assessment scheduled for May 2024; Department of Economics Planning and Statistics started releasing an “Advance Release Calendar” in 2024. *Prepared by Shohhei Kawase and Ganchimeg Ganpurev. — Annex I. External Sector Assessment* ### Annex IV. Table 2. Brunei Darussalam: Data Standard Initiatives ### Annex IV. Table 2. Brunei Darussalam: Data Standard Initiatives ### Overall data adequacy assessment and rationale - Overall assessment: "The data provided to the Fund has some shortcomings that somewhat hamper surveillance." - Principal rationale: - "There are substantial shortcomings that significantly hamper surveillance on external sector statistics, while government finance statistics' coverage and timeliness need enhancement." - Specific omissions and lags noted: "currently, there is no coverage of government-linked companies (GLCs) and contingent liabilities, among others." On timeliness, "there is a substantial data lag." - Authorities "plan to improve frequency and granularity of fiscal data submission in e-GDDS" and "are working to improve the Chart of Accounts (COA) and would like to request further assistance from the IMF to align with COA with GFSM (2014)." ### External sector statistics — key shortcomings and planned actions - Shortcomings: - "External sector statistics need improvement in coverage, granularity, consistency, and timeliness." - "Current BOP statistics do not cover gross inflow/outflow FDI and portfolio investments." - "Historically, large errors and omissions have been observed." - "There is a substantial delay in dissemination as BOP is published only once a year." - "IIP is not disseminated publicly." - Actions and plans: - Authorities "have been taking actions, including improving granularity of BOP data following recommendations from IMF TA on external sectors statistics (2020); however, more progress is needed to disseminate BOP fully compliant with BPM6 standard." - Dissemination plan: "Authorities plan to disseminate quarterly BOP data on an half-yearly basis with with less than existing lag. 2024Q1 and Q2 data will be disseminated including through e-GDDS starting 2024Q3." ### Government finance statistics — coverage, granularity, timeliness - Shortcomings: - Coverage gaps: "no coverage of government-linked companies (GLCs) and contingent liabilities." - Granularity: staff seek improved granularity of reported government operations and public debt statistics. - Timeliness: "On timeliness, there is a substantial data lag." - Authorities' actions: - "Authorities plan to improve frequency and granularity of fiscal data submission in e-GDDS." - Work to "improve the Chart of Accounts (COA)" and request IMF assistance to align COA with GFSM (2014). ### National accounts — issues and corrective steps - Shortcomings: - Base year: "Current GDP statistics have an outdated base year (2010)." - Sector detail: "there is a lack of distinction between private and public investment." - Timeliness: "Timeliness can improve as currently it is one quarter." - Corrective actions and capacity development: - IMF mission on National Accounts Assessment took place in May 2024: "This mission completed a review of sources and methodologies used for compiling annual and quarterly GDP." - Ongoing activities: "A census of enterprises is in progress to provide the necessary data for current price benchmark data to be compiled within a Supply-Use Table (SUT) for 2023." - Workplan developed: "for rebasing GDP to 2023 and for capacity development for compilers of national accounts." - Note (alternate phrasing in document): "there is IMF mission scheduled to Brunei for May 2024 on National Accounts Assessment." ### Monetary and financial statistics — gaps - Shortcomings: - Sector coverage: "the statistics do not cover the financial sector other than depository institutions and insurance companies." - Missing indicators: "There is a lack of data on household debt and income, and corporate indebtedness." - Granularity and financial soundness indicators: staff assess both Monetary and Financial Statistics granularity and Financial Soundness indicators (not disseminated in detail in this table). ### Price statistics - Shortcomings: - Base year: "Price statistics can benefit from an update to its outdated base year (2015)." - CPI basket: "Existing CPI basket is based on 2015 HES and authorities are currently conducting update on HES to better reflect the consumption pattern." - Timeliness: "improvement in timeliness" is needed. ### Inter-sectoral consistency and other data gaps - Inter-sectoral consistency: "discrepancies have been observed in the savings-investment balance ('S-I=CAB')." - Other priority data gaps: - "granular and more frequent data on employment and unemployment" is a priority. - "Additional efforts will be needed to collect and disseminate comprehensive climate related dashboards and taxonomies, and data on inequality." ### Use of third-party data and Article IV practice - Staff practice: "Staff do not use data and/or estimates different from official statistics." - For third party data use, staff follow Third Party Indicators (TPI) guidance note, including: - "(i) not illustrating ranking of countries," - "(ii) mentioning that some of the TPIs are perception based," - "(iii) following TPI data list." ### Participation in IMF data dissemination frameworks and key data-frequency highlights - Participation: "Brunei Darussalam participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes the data on its National Summary Data Page since August 2019." - Selected data provision and timeliness entries (as reported "As of July 2024"): - Exchange Rates: Date of Latest Observation "06/2024"; Date Received "07/2024"; Frequency "M"; Expected Timeliness "1M". - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation "04/2024"; Date Received "06/2024"; Frequency "M"; Expected Timeliness "1M". - Reserve/Base Money: Date of Latest Observation "04/2024"; Date Received "06/2024"; Frequency "M"; Expected Timeliness "2M". - Broad Money: Date of Latest Observation "04/2024"; Date Received "06/2024"; Frequency "M"; Expected Timeliness "1Q" (expected) and "2M" (Brunei Darussalam). - Central Bank Balance Sheet: Date of Latest Observation "04/2024"; Date Received "06/2024"; Frequency "M"; Expected Timeliness "2M". - Consolidated Balance Sheet of the Banking System: Date of Latest Observation "04/2024"; Date Received "06/2024"; Frequency "M"; Expected Timeliness "1Q" (expected) and "2M" (Brunei Darussalam). - Interest Rates: Date of Latest Observation "04/2024"; Date Received "06/2024"; Frequency "M"; Expected Timeliness "2M". - Consumer Price Index: Date of Latest Observation "05/2024"; Date Received "06/2024"; Frequency "M"; Expected Timeliness "2M". - Revenue, Expenditure, Balance and Composition of Financing — Central Government: Latest observation "Q4/FY2023"; Date Received "06/2024"; Frequency "Q"; Expected Timeliness "1Q" (expected) and "2Q" (Brunei Darussalam). - External Current Account Balance: Latest observation "2023"; Date Received "06/2024"; Frequency "A"; Expected Timeliness "1Q" (expected) and "6M" (Brunei Darussalam). - Exports and Imports of Goods and Services: Latest observation "12/2023"; Date Received "02/2024"; Frequency "M"; Expected Timeliness "12W" (expected) and "3M" (Brunei Darussalam). - GDP/GNP: Latest observation "Q1/2024"; Date Received "06/2024"; Frequency "Q"; Expected Timeliness "1Q". - International Investment Position: Latest observation "2023"; Date Received "Jun-24"; Frequency "A"; Expected Timeliness "3Q". - Note on frequency/timeliness codes: ("D") daily; ("W") weekly; ("M") monthly; ("Q") quarterly; ("A") annual; ("SA") semiannual; ("I") irregular; ("NA") not available or not applicable; ("NLT") not later than. ### Corrective actions, IMF engagement, and capacity development priorities - Recent and planned IMF engagement: - "IMF mission took place in Brunei in May 2024 on National Accounts Assessment." This mission "completed a review of sources and methodologies used for compiling annual and quarterly GDP." - "There is IMF mission scheduled to Brunei for May 2024 on National Accounts Assessment" (document also references this scheduled mission). - Corrective and capacity measures under way: - "A census of enterprises is in progress" to support SUT for 2023 and rebasing. - "A workplan was developed for rebasing GDP to 2023 and for capacity development for compilers of national accounts." - On external sectors, authorities "plan to disseminate quarterly BOP data on an half-yearly basis with with less than existing lag. 2024Q1 and Q2 data will be disseminated including through e-GDDS starting 2024Q3." - Continued desire for IMF technical assistance to align COA with GFSM (2014) and to improve dissemination practices. *Source: Annex IV. Table 2. Brunei Darussalam: Data Standard Initiatives (staff report excerpts).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1brnea2024001-print-pdf.pdf_