IMF Executive Board Concludes 2022 Article IV Consultation with Brunei Darussalam
IMF News, September 16, 2022
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- Published: September 16, 2022
Economic developments and outlook
- GDP contracted by 1.6 percent in 2021, led by slowdowns in O&G mining, LNG manufacturing, and downstream activities.
- For 2022, growth is projected to rebound to 1.2 percent, driven by easing of mobility constraints and a positive terms of trade shock due to surges in O&G prices.
- Inflation was 2.2 percent at end 2021 and has increased in 2022; inflation pressures are expected to remain elevated in the short term due to supply disruptions and higher food and fuel prices.
- Economy shows continued diversification: double-digit growth of the food/agriculture sector and a new fertilizer sector commencing production.
- Risks to the outlook are tilted to the downside: potential new COVID-19 variants; increased global uncertainty from an escalation of the war in Ukraine; monetary tightening from the US; and a larger-than-expected growth slowdown in China.
- Upside risk: higher energy prices would further improve the terms of trade and restore fiscal positions in the short term, while partially contributing to build buffers for stronger intergenerational equity.
Public finances and external sector
- Brunei has virtually no public debt and ample fiscal reserves; targeted fiscal support can leverage these reserves to alleviate pandemic effects on vulnerable businesses and households.
- Several fiscal consolidation initiatives implemented: fiscal consolidation program to reduce wasteful spending in the medium term; containment in public employment; introduction of new pension scheme to increase employer’s contribution rate.
- Current account balance (levels, millions of Brunei dollars):
- 2017: 1,984
- 2018: 937
- 2019: 895
- 2020: 514
- 2021: 644
- 2022: 2,080
- 2023: 1,747
- 2024: 2,056
- 2025: 2,314
- 2026: 2,450
- 2027: 2,635
- Gross Official Reserves (millions of Brunei dollars):
- 2017: 3,300
- 2018: 3,221
- 2019: 4,052
- 2020: 3,721
- 2021: 4,242
- 2022: 4,952
- 2023: 5,562
- 2024: 5,674
- 2025: 5,786
- 2026: 5,898
- 2027: 6,010
- In months of next year's imports of goods and services: 2017: 7.0; 2018: 5.7; 2019: 7.6; 2020: 4.7; 2021: 5.1; 2022: 6.0; 2023: 6.2; 2024: 6.4.
Policy recommendations
- Short-term: continue targeted fiscal support, leveraging fiscal reserves to protect vulnerable businesses and households.
- Medium- to long-term fiscal policy:
- Advance reforms to improve fiscal sustainability and intergenerational equity.
- Continue fiscal consolidation measures to improve efficiency of public spending, streamline untargeted subsidy and social spending, rationalize public employment, and mobilize revenue.
- Fully implement the medium-term fiscal framework to help stabilize public finances.
- Monetary and financial sector:
- Remove pandemic relief measures to the financial sector.
- Monetary policy should be mindful of inflation risks.
- Strengthen AML/CFT regulatory and supervisory framework; implement the Basel III framework; upgrade stress testing.
- Foster financial deepening to spur private sector development.
- Structural policies to support diversification and resilience:
- Ramp up economic diversification beyond oil and gas by expanding export portfolio and attracting quality FDI.
- Develop human capital and MSMEs to lay foundation for higher potential growth.
- Support digital and green growth to strengthen long-term resilience.
Structural reforms, capacity development, and international integration
- Authorities accelerated diversification efforts, attracting large FDIs in the oil refinery sector and increasing investments in agriculture and O&G downstream sectors.
- Participation in regional economic integration: engagement in the Regional Comprehensive Economic Partnership (RCEP) agreement and the new Indo-Pacific Economic Framework to provide market access and investment opportunities.
- Skills and MSME programs: i-Ready apprenticeship program and SkillsPlus program to upskill and reskill the workforce; policies to facilitate access to financial resources and entrepreneurship skill training for MSMEs.
- Data and capacity development:
- Measures taken to improve data management; authorities encouraged to further improve data compilation and dissemination.
- Welcomed recent close cooperation in Capacity Development (CD) with the IMF and authorities' plan to request further CD.
Executive Board assessment
- Directors commended policies to cushion pandemic impact and the impressive vaccination rollout.
- Directors observed a strong economic recovery underway, supported by lifting of COVID-19 restrictions, investment in large petrochemicals projects, and higher oil and gas prices.
- Directors emphasized maintaining supportive policies until a private sector led recovery is on a firm path, while continuing reforms to promote economic transformation and accelerate green, digital, and inclusive growth.
- Peg to the Singapore dollar: Directors agreed the peg remains appropriate as a credible nominal anchor for macroeconomic and financial stability and supports trade and investment linkages.
- Directors highlighted the importance of ongoing diversification, expanding export portfolio, attracting quality FDI, improving the business environment, investing in human capital, and developing micro, small and medium size enterprises.
Selected country statistics and indicators
- Area: 5,765 sq. kilometers
- Population (2021): 429,999
- Nominal GDP per capita (2021): US$32,573.3
- Main export destinations (2020): Japan (25.6 percent), Singapore (21.3), China (17.7), Malaysia (7.7), and India (5.3 percent)
- Unemployment rate (2020): 7.4%
- Labor force participation rate (2020): total 65.2%; male 74.0%; female 55.2%
- Selected series (levels or changes shown in source):
- Nominal GDP (millions of Brunei dollars): 2017: 16,748; 2018: 18,301; 2019: 18,375; 2020: 16,564; 2021: 18,822; 2022: 25,355; 2023: 24,699; 2024: 24,783; 2025: 25,060; 2026: 25,400; 2027: 26,092
- Real GDP (percentage change): 2017: 1.3; 2018: 0.1; 2019: 3.9; 2020: 1.1; 2021: -1.6; 2022: 3.3; 2023: 3.2; 2024: 2.5; 2025: 3.4
- Oil production ('000 barrels/day): 2017: 113; 2018: 112; 2019: 121; 2020: 110; 2021: 106; 2022: 104; 2023: 103; 2024: 109; 2025: 114; 2026: 120; 2027: 124
- Average Brunei oil price (U.S. dollars per barrel): 2017: 55.9; 2018: 73.2; 2019: 68.6; 2020: 43.1; 2021: 72.7; 2022: 86.0; 2023: 83.6; 2024: 71.6; 2025: 68.3; 2026: 63.8; 2027: 62.2
- Total revenue (percent of GDP, budgetary central government): 2017: 22.7; 2018: 32.7; 2019: 26.4; 2020: 12.6; 2021: 23.2; 2022: 23.7; 2023: 21.6; 2024: 20.8; 2025: 20.3; 2026: 19.7; 2027: 19.6
- Overall balance 2/ (percent of GDP): 2017: -12.9; 2018: 0.2; 2019: -5.6; 2020: -19.9; 2021: -4.6; 2022: -2.5; 2023: -3.4; 2024: -3.1
- Non-oil and Gas Balance (percent of GDP): 2017: -60.0; 2018: -53.5; 2019: -49.5; 2020: -46.0; 2021: -42.4; 2022: -34.6; 2023: -32.9; 2024: -31.5; 2025: -30.2; 2026: -29.0; 2027: -27.8
- Exports (millions of Brunei dollars): 2017: 5,475; 2018: 6,448; 2019: 7,213; 2020: 6,541; 2021: 7,908; 2022: 14,078; 2023: 11,285; 2024: 11,662; 2025: 12,011; 2026: 12,365; 2027: 12,846
- Of which: oil and gas (exports, millions): 2017: 5,021; 2018: 2,691; 2019: 3,244; 2020: 2,943; 2021: 4,446; 2022: 8,329; 2023: 4,512; 2024: 4,734; 2025: 4,916; 2026: 4,946; 2027: 5,036
- Imports (millions of Brunei dollars): 2017: 3,072; 2018: 4,089; 2019: 5,001; 2020: 5,176; 2021: 8,169; 2022: 11,615; 2023: 10,255; 2024: 9,839; 2025: 9,621; 2026: 9,498; 2027: 9,540
- Services (net, millions): 2017: -698; 2018: -1,007; 2019: -1,188; 2020: -855; 2021: -867; 2022: -883; 2023: -896; 2024: -911; 2025: -925; 2026: -938; 2027: -949
- Primary Income (net, millions): 2017: 721; 2018: 87; 2019: 362; 2020: 360; 2021: 538; 2022: 928; 2023: 2,021; 2024: 1,573; 2025: 1,271; 2026: 941; 2027: 702
- Secondary Income (net, millions): 2017: -442; 2018: -506; 2019: -490; 2020: -350; 2021: -448; 2022: -429; 2023: -409; 2024: -422; 2025: -420; 2026: -424
- Consumer prices (period average, percentage change): 2017: -1.3; 2018: 1.0; 2019: -0.4; 2020: 1.7; 2021: 1.5
- Private Sector Credit (percent change): 2017: -5.3; 2018: -5.0
- Narrow money (percent change): 2017: -5.7; 2018: -3.0; 2019: 6.6; 2020: 4.5
- Broad money (percent change): 2017: 2.8; 2018: 4.3; 2019: -4.0; 2020: 1.8
- Brunei dollars per U.S. dollar (period average): 2017: 1.38; 2018: 1.35; 2019: 1.36; 2020: 1.34
- Brunei dollar per U.S. dollar (end of period): 2017: 1.37
Press Release No. 22/307, September 16, 2022, IMF.
