IMF Executive Board Concludes 2023 Article IV Consultation with Brunei Darussalam
IMF News, October 6, 2023
Source details
- Canonical URL
- IMF Executive Board Concludes 2023 Article IV Consultation with Brunei Darussalam
Other formats
Bibliographic details
- Published: October 6, 2023
Recent economic developments
- Brunei has begun to recover from the pandemic, with COVID-19 restrictions lifted and borders reopened in 2022.
- Recovery hindered by reduced Oil and Gas (O&G) sector production despite rising commodity prices.
- Real GDP contracted in 2022 due to a decline in O&G production, partly offset by growth in downstream O&G activities and non-O&G sectors.
- Labor market improved, although gains were primarily in lower-paid jobs.
- Inflation rose in 2022 to 3.7 percent but has since moderated; the stable exchange rate helped mitigate the impact of imported inflation.
- Fiscal and current account positions improved in 2022, 1.6 and 19.6 percent, respectively, driven by higher O&G prices and an expansion of exports from the downstream sector.
- Banking sector remains stable, liquid, and well capitalized with declining non-performing loans; domestic lending showed signs of recovery, particularly in the corporate sector.
Outlook and risks
- Growth is forecasted to contract by about 1 percent in 2023 due to reduced O&G production—largely driven by the deferment of infrastructure maintenance in the O&G sector—while non-O&G sector recovery will continue to contribute positively.
- Inflation is predicted to moderate to 1.7 percent, with the easing of global supply chain bottlenecks and commodity price normalization.
- Fiscal and external positions are projected to weaken to deficit of around -9 percent of GDP and a surplus of 10.6 percent of GDP respectively in 2023, and through the medium-term.
- Key challenges: gradually narrowing fiscal space, need to shield the economy against O&G sector volatility, global decarbonization pressures, and ensuring intergenerational equity.
- Risks include protracted O&G maintenance activities and a less favorable external environment that could impede the recovery; higher O&G prices could provide an upside.
Executive Board assessment and policy recommendations
- Directors noted that a contraction in the oil and gas sector weakened the recovery and that the outlook remains subject to substantial downside risks.
- Emphasized need for prudent policies and structural reforms to support the recovery, maintain macroeconomic stability, and promote diversification and climate resilience.
- Recommended priorities and policy measures:
- Pursue fiscal prudence amid uncertainties in oil and gas production and prices and long-term decarbonization pressures.
- Focus on growth-friendly fiscal consolidation that protects the vulnerable and raises public investment.
- Mobilize non-oil and gas revenues.
- Implement targeted subsidies.
- Rationalize the wage bill.
- Improve fiscal transparency and risk analysis.
- Establish a strong and credible medium-term fiscal framework.
- Further align policy rates with the Monetary Authority of Singapore and improve liquidity management within the enduring currency board arrangement.
- Maintain vigilance against tail risks in the financial sector and enhance financial market development, prudential frameworks, and AML/CFT enforcement.
- Continue critical policy reforms supporting economic diversification and climate transition, including human capital development, digitalization, enhancing public investments and PPPs, regional integration, and data quality.
- Advance the transition plan for the Net Zero Target by 2050 and consider implications of carbon pricing for mitigation and revenue diversification.
- Continued capacity development supported by the Fund was deemed important.
Selected economic and financial indicators (highlights)
- Area: 5,765 sq. kilometers
- Population (2021): 440,715
- Nominal GDP per capita (2021): US$31,449.1
- Main export destinations ( Nov 2022): Australia (21.2 percent), Japan (15.8), China (15.0), and Singapore (13.4)
- Unemployment rate (2021): 4.9%
- Labor force participation rate (2020): total 63.8%; male 71.7%; female 54.9%
- Nominal GDP (millions of Brunei dollars): 2022: 23,003; 2023 (Est.): 20,321; 2024 (Proj.): 21,483; 2025 (Proj.): 22,220; 2026 (Proj.): 22,952; 2027 (Proj.): 23,900; 2028 (Proj.): 24,883
- Nominal non-oil and gas GDP (millions of Brunei dollars): 2022: 11,043; 2023 (Est.): 11,958; 2024 (Proj.): 12,738; 2025 (Proj.): 13,545; 2026 (Proj.): 14,683; 2027 (Proj.): 15,829; 2028 (Proj.): 17,061
- Real GDP (percentage change): 2018: 0.1; 2019: 3.9; 2020: 1.1; 2021: -1.6; 2022: -0.8; 2023 (Est.): 3.5; 2024 (Proj.): 2.8; 2025 (Proj.): 3.0; 2026 (Proj.): 3.1; 2027 (Proj.): 3.2
- Oil and gas sector GDP (percentage change): 2018: -1.5; 2019: -4.9; 2020: -4.8; 2021: -7.3; 2022: -4.7; 2023 (Est.): 6.3; 2024 (Proj.): 2.1; 2025 (Proj.): 1.9; 2026 (Proj.): 1.5
- Non-oil and gas sector GDP (percentage change): 2018: 8.9; 2019: 2.0; 2020: 4.3; 2021: 0.9; 2022: 3.6; 2023 (Est.): 4.0; 2024 (Proj.): 4.5
- Oil production ('000 barrels/day): 2018: 112; 2019: 121; 2020: 110; 2021: 107; 2022: 92; 2023 (Est.): 84; 2024 (Proj.): 79; 2025 (Proj.): 94; 2026 (Proj.): 102
- Natural gas output (millions BTUs/day): 2018: 1,372; 2019: 1,402; 2020: 1,358; 2021: 1,253; 2022: 1,151; 2023 (Est.): 1,114; 2024 (Proj.): 1,270; 2025 (Proj.): 1,220; 2026 (Proj.): 1,195; 2027 (Proj.): 1,319; 2028 (Proj.): 1,331
- Average Brunei oil price (U.S. dollars per barrel): 2018: 73.2; 2019: 68.6; 2020: 43.3; 2021: 72.1; 2022: 107.7; 2023 (Est.): 83.0; 2024 (Proj.): 79.1; 2025 (Proj.): 75.3; 2026 (Proj.): 73.3; 2027 (Proj.): 71.1; 2028 (Proj.): 69.6
- Average Brunei gas price (U.S. dollars per million BTU): 2018: 10.5; 2019: 9.1; 2020: 6.7; 2021: 14.4; 2022: 5.4; 2023 (Est.): 5.8; 2024 (Proj.): 4.4; 2025 (Proj.): 3.3
- Consumer prices (period average, percentage change): 2022: 3.7
Public finances (Budgetary Central Government, percent of GDP)
- Total revenue: 2018: 32.7; 2019: 26.4; 2020: 12.6; 2021: 24.1; 2022: 28.3; 2023 (Est.): 19.5; 2024 (Proj.): 19.4; 2025 (Proj.): 18.6; 2026 (Proj.): 17.4; 2027 (Proj.): 16.5; 2028 (Proj.): 15.7
- Oil and gas revenue: 2018: 19.8; 2019: 7.7; 2020: 20.2; 2021: 24.5; 2022: 14.8; 2023 (Est.): 14.7; 2024 (Proj.): 13.6; 2025 (Proj.): 12.1; 2026 (Proj.): 11.0; 2027 (Proj.): 9.9
- Other revenue: 2018: 6.5; 2019: 5.0; 2020: 4.7; 2021: 4.8; 2022: 5.3; 2023 (Est.): 5.5
- Total Expenditure: 2018: 32.5; 2019: 31.9; 2020: 32.6; 2021: 29.2; 2022: 26.7; 2023 (Est.): 28.7; 2024 (Proj.): 27.2; 2025 (Proj.): 26.5; 2026 (Proj.): 25.8; 2027 (Proj.): 25.0; 2028 (Proj.): 24.3
- Current expenditure: 2018: 29.8; 2019: 29.5; 2020: 31.3; 2021: 28.1; 2022: 25.7; 2023 (Est.): 25.9; 2024 (Proj.): 25.3; 2025 (Proj.): 24.6; 2026 (Proj.): 23.8; 2027 (Proj.): 23.0
- Capital expenditure: 2018: 2.7; 2019: 2.4; 2020: 1.3; 2021: 1.2; 2022: (not listed)
- Overall balance 2/: 2018: 0.2; 2019: -5.6; 2020: -20.0; 2021: -5.1; 2022: 1.6; 2023 (Est.): -9.2; 2024 (Proj.): -7.7; 2025 (Proj.): -7.9; 2026 (Proj.): -8.5
- Non-oil and Gas Balance (In percent of non-oil and gas GDP): 2018: -53.5; 2019: -49.5; 2020: -46.1; 2021: -44.3; 2022: -39.2; 2023 (Est.): -38.2; 2024 (Proj.): -35.1; 2025 (Proj.): -32.7; 2026 (Proj.): -30.0; 2027 (Proj.): -27.6; 2028 (Proj.): -25.3
Money and banking / external sector highlights
- Private Sector Credit: 2019: -3.1; 2020: 6.0
- Narrow money: 2019: -3.0; 2020: 6.6; 2021: 20.8; 2022: 3.8
- Exports (millions): 2018: 6,473; 2019: 7,207; 2020: 6,542; 2021: 11,006; 2022: 14,130; 2023 (Est.): 10,475; 2024 (Proj.): 10,814; 2025 (Proj.): 11,139; 2026 (Proj.): 11,441; 2027 (Proj.): 11,645; 2028 (Proj.): 12,088
- Of which: oil and gas exports: 2018: 2,691; 2019: 3,244; 2020: 2,943; 2021: 4,730; 2022: 5,660; 2023 (Est.): 3,344; 2024 (Proj.): 3,565; 2025 (Proj.): 3,718; 2026 (Proj.): 3,830; 2027 (Proj.): 3,723; 2028 (Proj.): 3,787
- Imports (millions): 2018: 4,113; 2019: 4,999; 2020: 5,157; 2021: 8,326; 2022: 8,977; 2023 (Est.): 7,678
- Services (net): 2018: -1,008; 2019: -1,189; 2020: -854; 2021: -697; 2022: -848; 2023 (Est.): -948
- Primary Income (net): 2018: 361; 2019: 362; 2020: 90; 2021: -370; 2022: 261; 2023 (Est.): 306
- Secondary Income (net): 2018: -506; 2019: -490; 2020: -350; 2021: -502; 2022: -671; 2023 (Est.): -508
- Current Account Balance (millions): 2018: 930; 2019: 890; 2020: 542; 2021: 1,572; 2022: 3,264; 2023 (Est.): 1,603; 2024 (Proj.): 1,832; 2025 (Proj.): 2,060; 2026 (Proj.): 2,214; 2027 (Proj.): 2,323; 2028 (Proj.): 2,542
- Current Account Balance (in percent of GDP): 2018: 6.9; 2019: 11.2; 2020: 19.6; 2021: 10.6; 2022: 11.6; 2023 (Est.): 12.7; 2024 (Proj.): 13.2; 2025 (Proj.): 13.3; 2026 (Proj.): 14.0
- Gross Official Reserves (millions): 2018: 3,407; 2019: 4,273; 2020: 3,997; 2021: 4,980; 2022: 5,035; 2023 (Est.): 5,145; 2024 (Proj.): 5,257; 2025 (Proj.): 5,369; 2026 (Proj.): 5,481; 2027 (Proj.): 5,593; 2028 (Proj.): 5,705
- In months of next year's imports of goods and services: 8.1; 5.2; 5.9; 6.8 (years corresponding to table entries)
- Brunei dollars per U.S. dollar (period average): 2018: 1.35; 2019: 1.36; 2020: 1.38; 2021: 1.34
- Brunei dollar per U.S. dollar (end of period): 2018: 1.32
Press Release No. 23/336 — IMF Communications Department