IMF Executive Board Concludes 2018 Article IV Consultation with Brunei Darussalam
IMF News, October 10, 2018
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- Published: October 10, 2018
Economic adjustment and recent performance
- Brunei Darussalam’s economy has been adjusting to lower oil prices since 2014, with authorities undertaking wide-ranging reforms aimed at: (i) ensuring long-term fiscal sustainability and intergenerational equity and (ii) fostering economic diversification by improving the business climate.
- Real GDP in 2017 rebounded to 1.3 percent, supported by both the O&G and non-O&G sectors.
- O&G sector growth in 2017 was driven by higher liquified natural gas (LNG) and methanol production, which more than offset lower oil production.
- Non-O&G growth in 2017 was mainly underpinned by ongoing downstream construction projects.
- Recent data indicate the recovery carried over into early 2018; growth is expected to accelerate to 2.3 percent in 2018.
Outlook and projections (2018–23)
- Growth momentum is expected to continue, with projections showing:
- Real GDP: 2.3 percent (2018), 5.1 percent (2019), 4.3 percent (2020), 7.5 percent (2021), 5.9 percent (2022), 3.9 percent (2023).
- Oil and gas sector GDP: 1.2 percent (2017), 2.6 percent (2018), 4.5 percent (2019), 0.6 percent (2020), 9.2 percent (2021), 7.3 percent (2022), (no 2023 value reported in table beyond 2022).
- Non-oil and gas sector GDP: 1.5 percent (2017), 1.9 percent (2018), 9.5 percent (2019), 5.3 percent (2020), 4.0 percent (2021), 3.0 percent (2022).
- Drivers and balances:
- Start of downstream production—including from the Hengyi refinery and Brunei Fertilizer Industries (BFI)—and stronger O&G activities expected to result in robust GDP growth and exports in 2019–23.
- Imports linked to FDI project execution likely to keep the current account at moderate surplus in 2018; surplus expected to increase from 2019 onward.
- Fiscal position expected to recover over the medium term but remains vulnerable to O&G price shocks.
- Inflation expected to remain low but positive.
- Risks: broadly balanced in the near term, with substantial uncertainty surrounding O&G prices, plus risks from rising protectionism and tighter global financial conditions.
Fiscal and public finance indicators
- Budgetary central government indicators (percent of GDP unless stated):
- Total revenue: 37.7 (2014), 24.2 (2015), 17.7 (2016), 26.0 (2017), 23.3 (2018), 23.4 (2019), 21.9 (2020), 22.7 (2021), 23.6 (2022), (2023 value present in table as ? but omitted in narrative).
- Of total revenue, oil and gas: 32.9 (2014), 18.4 (2015), 12.3 (2016), 18.0 (2017), 18.9 (2018), 19.1 (2019), 17.3 (2020), 18.1 (2021), 18.8 (2022), 19.0 (2023).
- Total expenditure: 34.1 (2014), 38.7 (2015), 39.4 (2016), 36.6 (2017), 30.4 (2018), 29.0 (2019), 29.1 (2020), 27.5 (2021), 26.3 (2022), 25.6 (2023).
- Current expenditure: 25.3 (2014), 29.6 (2015), 30.6 (2016), 30.7 (2017), 25.9 (2018), 24.7 (2019), 24.6 (2020), 22.3 (2021), 21.6 (2022).
- Capital expenditure: 8.8 (2014), 9.1 (2015), 8.7 (2016), 4.2 (2017).
- Overall primary balance: 3.6 (2014), -14.5 (2015), -21.7 (2016), -10.6 (2017), -7.1 (2018), -5.7 (2019), -4.8 (2020), -2.9 (2021), -2.0 (2022).
- Non-oil and gas overall primary deficit (percent of non-oil and gas GDP): -82.2 (2014), -76.4 (2015), -71.6 (2016), -63.7 (2017), -66.8 (2018), -62.4 (2019), -56.5 (2020), -53.1 (2021), -50.4 (2022), -48.7 (2023).
- Authorities launched a reform program in 2015 to ensure long-term fiscal sustainability and intergenerational equity and to diversify the economy.
Financial sector, FDI, and diversification efforts
- Progress reported on:
- Fiscal consolidation, financial sector regulation adjustment, improving business climate, attracting foreign direct investment (FDI), and supporting micro, small and medium enterprises (MSMEs).
- From 2016 to 2018, Brunei experienced the largest cumulative improvement in the World Bank Doing Business score, with a remarkable improvement in access to credit.
- Major FDI projects: Hengyi refinery and Brunei Fertilizer Industries (BFI) in the downstream sector expected to contribute to Wawasan 2035 goals.
- Financial Sector Blueprint: five pillars identifying areas for action to foster new international financial linkages and boost the financial sector’s contribution to GDP.
- Money and banking indicators:
- Private sector credit: 1.8 (2014), -6.2 (2015), -5.3 (2016), 1.1 (2017), 2.9 (2018), 4.1 (2019), 2.4 (2020).
- Narrow money: -1.5 (2014), 6.4 (2015), -0.1 (2016), 5.7 (2017), 4.9 (2018), 3.1 (2019).
- Broad money: 3.2 (2014), -1.8 (2015), 3.4 (2016).
Executive Board assessment — findings and policy recommendations
- Findings:
- Directors noted Brunei has been adjusting well to lower O&G prices since 2014 and welcomed the rebound in economic growth and prospects for continued recovery.
- Directors commended authorities for wide-ranging reforms but noted important risks including uncertainty surrounding O&G prices and production, rising protectionism, and tighter global financial conditions.
- Brunei dollar’s peg to the Singapore dollar remains appropriate, providing a credible monetary anchor and stability to the financial system.
- Policy recommendations (emphasized by Directors):
- Continue reform implementation to ensure long-term sustainability and intergenerational equity, increase productivity and competitiveness, diversify growth sources, and build resilience to shocks.
- Continue fiscal consolidation to bring the fiscal position closer to that required by intergenerational equity considerations.
- Fiscal policy reforms should focus on:
- Rationalizing current expenditure, including gradually reforming fuel subsidies.
- Containing the wage bill by streamlining the civil service.
- Diversifying revenues.
- Formalize a medium term fiscal framework and intensify public financial management reforms, including:
- Incorporating subsidies and extra-budgetary funds in the budget presentation.
- Improving management and better monitoring of public expenditure.
- Further efforts toward financial sector development, with improvements in banking regulation and supervision to preserve financial stability.
- Broadening the investor base, establishing a secondary bond market, and creating a stock exchange.
- Operationalize the macroprudential surveillance framework and continue developing a contingency planning and crisis management framework for the banking system.
- Sustain efforts to enhance the business environment, support MSME growth, and raise human capital to develop the non-O&G and private sectors and attract FDI; further measures needed to generate stronger positive spillovers from FDI to the rest of the economy. Support for MSMEs should be assessed regularly.
- Continue improving statistical compilation and technical capacity; undertake a data ROSC and address remaining data and dissemination gaps.
Selected economic and financial indicators (high-level)
- Area: 5,765 sq. kilometers
- Population (2017): 421,300
- GDP per capita (2017): US$28,787
- Main export destinations (2015): Japan (36.4), Korea (15.6), Thailand (8.6)
- Unemployment rate (2014): 6.9
- Labor force participation rate (2014): total 65.6%; male 72.4%; female 58.3%
- Key monetary and external figures (selected series):
- Oil production ('000 barrels/day): 126 (2014), 127 (2015), 121 (2016), 113 (2017), 134 (2018), 139 (2019), 138 (2020), 142 (2021), 145 (2022).
- Natural gas output (millions cu. ft./day): 1,170 (2014), 1,228 (2015), 1,205 (2016), 1,234 (2017), 1,208 (2018), 1,238 (2019), 1,253 (2020), 1,506 (2021), 1,718 (2022), 1,809 (2023).
- Average Brunei oil price (U.S. dollars per barrel): 104.4 (2014), 53.9 (2015), 44.6 (2016), 55.9 (2017), 73.9 (2018), 73.4 (2019), 69.2 (2020), 66.1 (2021), 63.8 (2022), 62.3 (2023).
- Average Brunei gas price (U.S. dollars per million BTU): 16.6 (2014), 10.6 (2015), 8.3 (2016), 10.3 (2017), 9.6 (2018), 8.6 (2019).
- Current account balance (millions): 5,459 (2014), 2,157 (2015), 1,470 (2016), 2,021 (2017), 1,147 (2018), 2,643 (2019), 2,678 (2020), 2,598 (2021), 2,564 (2022), 2,733 (2023).
- Current account balance (in percent of GDP): 31.9 (2014), 16.7 (2015), 12.9 (2016), 7.8 (2017), 17.4 (2018), 17.5 (2019), 16.1 (2020), 15.1 (2021), 15.7 (2022).
- Gross official reserves (millions): 3,471 (2014), 3,211 (2015), 3,322 (2016), 3,300 (2017), 3,404 (2018), 3,511 (2019), 3,618 (2020), 3,727 (2021), 3,837 (2022), 3,938 (2023).
- Brunei dollars per U.S. dollar (period average): 1.27 (2014), 1.37 (2015), 1.38 (2016).
- Brunei dollar per U.S. dollar (end of period): 1.32 (2014), 1.41 (2015), 1.44 (2016), 1.35 (latest period reported).
- Nominal GDP (millions of Brunei dollars): 21,664 (2014), 17,778 (2015), 15,748 (2016), 16,748 (2017), 19,726 (2018), 20,528 (2019), 20,385 (2020), 21,398 (2021), 22,237 (2022), 22,764 (2023).
- Nominal non-oil and gas GDP (millions of Brunei dollars): 7,733 (2014), 7,658 (2015), 7,463 (2016), 7,531 (2017), 7,693 (2018), 8,135 (2019), 8,806 (2020), 9,220 (2021), 9,595 (2022), 9,825 (2023).
Press Release No. 18/389 — IMF Communications Department, October 10, 2018.