IMF Executive Board Concludes 2021 Article IV Consultation with Brunei Darussalam
IMF News, September 20, 2021
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- Published: September 20, 2021
Economic impact of COVID-19 and oil & gas shock
- Brunei’s economic performance was strong before the COVID-19 pandemic but was buffeted by the health crisis and a pandemic-induced oil and gas (O&G) price shock.
- Public health response: number of new infections was quickly suppressed through a swift public health response, effective health measures and non-pharmaceutical interventions.
- Sectoral outcomes in 2020:
- O&G sector: significant output contraction in 2020—the largest since the oil price shock in mid-2014.
- Contact-intensive non-O&G sectors (hotels, restaurants and air transport) contracted by 1.6 percent in 2020.
- Downstream non-O&G sector (manufacture of petroleum and chemical products) contributed 4.6 percentage points to real GDP growth in 2020.
- Macroeconomic result in 2020: real GDP posted positive growth of 1.1 percent, supported by strong fiscal and monetary policy responses sustaining production, household income and consumption.
Outlook and projections
- Short- and medium-term risks: outlook subject to unusual uncertainty with significant risks skewed to the downside; recent resurgence of the pandemic and containment measures would slow the recovery, especially in contact-intensive sectors; stronger vaccine rollouts and energy prices could surprise to the upside.
- Growth and structural change:
- Real GDP growth is projected at around 2 percent over the medium term.
- Share of non-O&G projected to rise to around 52 percent of GDP by 2026, reflecting diversification efforts.
- Employment expected to increase as the recovery strengthens.
- Inflation and external positions:
- Headline inflation projected to average 2.5 percent in 2021; price pressure expected to subside over the medium term.
- Fiscal position expected to recover over the medium term.
- Current account surplus expected to increase in the medium term, reflecting stronger exports of O&G and downstream products.
Policy recommendations and priorities
- Short-term macro policy: continue macroeconomic policy mix to support the recovery; maintain supportive policies until the recovery is on a firm path.
- Fiscal policy:
- Continue short-term fiscal support to underpin recovery in private demand while incentivizing resource re-allocation.
- Leverage Brunei’s ample fiscal reserves, noting virtually no public debt.
- Continue reforms to improve fiscal position, including strengthening the medium-term fiscal framework to achieve sustainable long-term expenditure and improve intergenerational equity.
- Financial stability:
- Financial sector regulation and supervision should remain vigilant.
- Step-up development of a holistic macroprudential framework to safeguard financial stability while ensuring access by productive sectors to financing.
- Strengthen the AML/CFT framework to maintain financial system integrity.
- Structural policies:
- Strengthen policies to build human capital and attract higher value-added FDI.
- Accelerate digital and green growth to foster resilience, job creation, and enhance competitiveness.
Recent reforms and structural initiatives
- Fiscal consolidation and efficiency:
- Fiscal consolidation program to reduce wasteful spending in the medium term.
- Establishment of a medium-term fiscal framework.
- Containment in public employment.
- Initial subsidy reform steps: launch of high-quality fuel without subsidy, a smart metering system for power and water, and digitalized National Welfare System.
- Economic diversification and human capital:
- Commencement of the Economic Blueprint emphasizing human capital development and linkage to regional and global trade.
- Private sector employment measures: JobCentre Brunei, Politeknik Brunei, I-Ready, Lifelong Learning Center, SkillsPlus.
- FDI and downstream industry: sizable FDI attracted mainly in the downstream industry via customized supports and improved ease of starting a business.
- Digitalization and climate policy: new policy packages on digitalization and climate change response for smart and green growth.
- Data and IMF support: steps taken to address data gaps; authorities plan to request further capacity development support from the IMF to improve data collection and dissemination.
Executive Board assessment
- Directors commended the authorities for strong, timely, and multi-pronged policy response to COVID-19 and the O&G price decline.
- Given uncertain outlook and downside risks, Directors stressed need to maintain supportive policies until recovery is firm and continue reforms to support economic transformation, strengthen resilience, and foster green, digital, and inclusive growth.
- Fiscal policy: Directors welcomed recent initiatives (credible medium-term budget framework, efficiency measures, public employment rationalization, subsidy reform) and saw scope for further efforts to reduce vulnerabilities and support intergenerational equity.
- Exchange rate policy: Directors agreed the peg to the Singapore dollar remains appropriate as a credible nominal anchor and to deepen trade and investment linkages.
- Financial sector: Directors noted banking sector resilience; commended initiatives to enhance risk-based supervision, introduce the Basel III framework, develop a holistic macroprudential framework, and strengthen AML/CFT legislative framework.
- Diversification and labor: Directors encouraged continued efforts to diversify the economy, attract FDI, enhance human capital, and improve private employment; welcomed Economic Blueprint priorities and emphasized accelerating digital and green growth.
- Data: Directors welcomed steps to address data gaps and the authorities’ commitment to improve data compilation and reporting.
Key statistics (selected)
- Area: 5,765 sq. kilometers
- Population (2019): 433,285
- Nominal GDP per capita (2019): US$31,087
- Main export destinations (2019): Japan (34.7), Thailand (10.1), Australia (8.8), Korea (8.6)
- Unemployment rate (2019): 6.8%
- Labor force participation rate (2019): total 64.3%; male 72.5%; female 54.8%
Selected time series highlights (2016–26, as reported)
- Real GDP (percentage change): 2016 -2.5; 2017 1.3; 2018 0.1; 2019 3.9; 2020 1.1; 2021 2.0; 2022 2.6; 2023 2.4; 2024 2.2; 2025 2.1.
- Nominal GDP (millions of Brunei dollars): 2016 15,748; 2017 16,747; 2018 18,301; 2019 18,375; 2020 16,561; 2021 20,626; 2022 21,086; 2023 20,237; 2024 20,141; 2025 20,192; 2026 20,356.
- Nominal non-oil and gas GDP (millions of Brunei dollars): 2016 7,463; 2017 7,514; 2018 7,572; 2019 7,733; 2020 7,642; 2021 8,333; 2022 8,550; 2023 8,705; 2024 8,869; 2025 9,046; 2026 9,233.
- Oil production ('000 barrels/day): 2016 121; 2017 113; 2018 112; 2019 110; 2020 109; 2021 108; 2022 106; 2023 105; 2024 102; 2025 101.
- Natural gas output (millions BTUs/day): 2016 1,397; 2017 1,430; 2018 1,372; 2019 1,313; 2020 1,077; 2021 1,065; 2022 1,081; 2023 1,094; 2024 1,123; 2025 1,158; 2026 1,192.
- Average Brunei oil price (U.S. dollars per barrel): 2016 44.6; 2017 55.9; 2018 73.2; 2019 68.6; 2020 43.1; 2021 62.7; 2022 62.9; 2023 58.9; 2024 57.2; 2025 55.7; 2026 55.1.
- Consumer prices (period average, percentage change): 2016 -0.4; 2017 -1.3; 2018 1.9; 2019 2.5; 2020 1.0; 2021 (projected) 2.5 percent average.
- Public finances: total revenue (percent of GDP): 2016 22.7; 2017 32.7; 2018 26.4; 2019 12.5; 2020 19.1; 2021 19.4; 2022 18.5; 2023 18.8; 2024 18.7; 2025 18.7; 2026 18.7.
- Public finances: total expenditure (percent of GDP): 2016 39.3; 2017 35.6; 2018 32.5; 2019 31.9; 2020 32.2; 2021 28.4; 2022 28.8; 2023 29.0; 2024 29.6; 2025 29.7; 2026 29.8.
- Overall balance (percent of GDP): 2016 -16.6; 2017 -12.9; 2018 0.2; 2019 -5.6; 2020 -19.7; 2021 -9.3; 2022 -9.4; 2023 -10.5; 2024 -10.9; 2025 -11.1.
- Non-oil and gas balance (percent of non-oil and gas GDP): 2016 -65.1; 2017 -63.2; 2018 -56.9; 2019 -54.0; 2020 -53.0; 2021 -52.4; 2022 -52.1; 2023 -49.8; 2024 -49.9; 2025 -49.1; 2026 -47.1.
- Current account balance (in percent of GDP): 2016 12.9; 2017 16.4; 2018 6.9; 2019 5.1; 2020 9.7; 2021 10.8; 2022 13.0.
- Gross official reserves (millions of U.S. dollars): 2016 3,322; 2017 3,300; 2018 3,221; 2019 4,052; 2020 3,721; 2021 4,242; 2022 4,352; 2023 4,462; 2024 4,574; 2025 4,686; 2026 4,798.
- Months of next year's imports of goods and services (reserves): 2016 9.2; 2017 7.0; 2018 5.7; 2019 7.6; 2020 5.4.
Source: Press Release No. 21/271, IMF Executive Board Concludes 2021 Article IV Consultation with Brunei Darussalam (September 20, 2021).
