IMF Executive Board Concludes 2024 Article IV Consultation with Brunei Darussalam
IMF News, September 25, 2024
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- Published: September 25, 2024
Recent economic performance and staff appraisal
- Real GDP rose by 1.4 percent in 2023 after two years of recession, mainly driven by the non-oil and gas (O&G) sector and earlier-than-anticipated production from the new Salman oil field in Q4 2023.
- Inflation fell to 0.4 percent in 2023 compared to 3.7 percent in 2022, supported by easing post-pandemic supply chain disruptions, softening commodity prices, and large subsidies and price controls.
- Fiscal and external positions deteriorated in 2023 reflecting weaker O&G production and prices; the current account was also impacted by higher service imports and net income outflows.
- The banking sector remains stable, liquid, and well capitalized with declining non-performing loans.
Outlook and risks
- Growth is forecast at about 2.4 percent in 2024 on the back of expected increases in O&G production, including from new offshore oil fields, and a rebound in the downstream sector; domestic non-O&G non-tradeable sector growth is expected to plateau.
- Inflation is expected to remain unchanged at 0.5 percent in 2024.
- Fiscal and external balances would stabilize alongside O&G prices.
- Near-term risks are tilted downward due to external factors and O&G production challenges.
- Upside scenario: new O&G field discoveries would provide significant upside.
- Structural and transition risks: decarbonization pressures and adoption of artificial intelligence pose economic and social challenges.
Executive Board recommendations on fiscal policy
- 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; priority should shift to restoring fiscal buffers through growth-friendly fiscal consolidation.
- Policy instruments recommended:
- Enhanced revenue generation.
- Consideration of a low-rate carbon tax.
- Expenditure rationalization, including more targeted subsidies.
- Development of a fiscal consolidation plan with clear fiscal targets.
- Establishment of a MTFF and fiscal anchors, and strengthening fiscal risk management and transparency.
Monetary policy, exchange arrangement, and liquidity management
- The currency board arrangement with Singapore is sound and has supported macroeconomic and financial stability.
- Recommended improvements in monetary operations:
- 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.
- Encourage enhanced 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 I-bill issuance and consider establishing a single treasury account.
Financial sector stability and regulatory priorities
- Financial sector remained stable with strong capital and liquidity buffers; systemic risk is assessed to be contained.
- Monitoring and prudential measures advised:
- Careful tracking of credit growth in both offshore and domestic personal loans.
- Ensure foreign loans continue to be invested in highly credit-rated assets to mitigate credit risk.
- For domestic lending, deploy prudential measures like capping the Total Debt Service Ratio, assessing unsecured personal loan exposure, and maintaining NPL standards.
- Authorities encouraged to implement Basel III standards for better liquidity management by the end-2024.
- Implement stress tests, including consideration of stress testing for climate transition and physical risks.
- Strengthen prudential frameworks, develop a long-term sukuk market, adopt a green taxonomy and unify disclosure standards.
- Improve AML/CFT effectiveness and continue implementing the APG’s Mutual Evaluation Report recommendations.
Structural reforms, diversification, and climate agenda
- Authorities’ commitment to ambitious and sustained structural reforms is critical to ensure growth and diversification, including transition to a low-carbon economy.
- Net zero emissions goal by 2050 will require continued development of the non-O&G sector and adoption of green technologies.
- Priorities include continued skill development, addressing AI-related challenges, and closing structural gaps in first-generation reform areas (external sector trade facilitation, improving business regulation, and governance) vis-à-vis top peers to facilitate FDI and PPPs.
- Completing the 2025 National Adaptation Plan and a Climate Vulnerability Assessment should support prioritization of adaptation strategies.
Data, statistical, and transparency issues
- Data provided to the Fund has some shortcomings that hamper surveillance; data quality should be strengthened.
- Steps needed to close identified data gaps in national income, prices, external and fiscal sectors.
- Recommended actions:
- 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.
Key statistics and projections (selected, as reported)
- 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), and Singapore (16.7)
- Unemployment rate (2023): 5.1%
- Labor force participation rate (2023): total 67.2; male 75.8%; female 57.3%
- Real GDP (percentage change):
- 2019: 3.9
- 2020: 1.1
- 2021: -1.6
- 2022: 1.4
- 2023: 2.4
- 2024 (Proj.): 2.6
- 2025 (Proj.): 2.7
- 2026 (Proj.): 2.9
- 2027 (Proj.): 3.1
- Oil production ('000 barrels/day):
- 2019: 121
- 2020: 110
- 2021: 107
- 2022: 92
- 2023: 74
- 2024 (Proj.): 84
- 2025 (Proj.): 94
- 2026 (Proj.): 99
- 2027 (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
- 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: 14.4
- 2022: 10.9
- 2023: 8.6
- 2024 (Proj.): 9.9
- 2025 (Proj.): 8.7
- 2026 (Proj.): 7.8
- 2027 (Proj.): 7.4
- 2028 (Proj.): 7.0
- Consumer prices (period average, percentage change):
- 2019: -0.4
- 2020: 1.9
- 2021: 3.7
- 2022: 0.4
- 2023: 0.5
- Public Finances: Budgetary Central Government (Fiscal Year, 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: 5.6
- 2023: 5.5
- 2024 (Proj.): 5.3
- 2025 (Proj.): 5.2
- 2026 (Proj.): 5.4
- 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.): 23.6
- 2028 (Proj.): 22.8
- Overall balance 2/:
- 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
- Balance of Payments (exports, imports, goods, services, current account):
- Goods (millions of U.S. dollars):
- 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
- Exports of which: oil and gas:
- 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: -370
- 2022: 194
- 2023: 327
- 2024 (Proj.): 226
- 2025 (Proj.): 193
- 2026 (Proj.): 146
- 2027 (Proj.): 119
- 2028 (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 (millions of U.S. dollars):
- 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: 11.2
- 2020: 19.6
- 2021: 12.9
- 2022: 15.0
- 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
- Gross official reserves in months of next year's imports of goods and services:
- 2019: 8.0
- 2020: 5.9
- Brunei dollars per U.S. dollar (period average):
- 2019: 1.36
- 2020: 1.38
- 2021: 1.34
- Brunei dollar per U.S. dollar (end of period):
- 2019: 1.35
- 2020: 1.33
IMF Executive Board press release, September 25, 2024.
