Brunei Darussalam: 2022 Article IV Consultation-Press Release; and Staff Report
IMF Staff Country Reports, September 16, 2022
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Bibliographic details
- Published: September 16, 2022
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400219085.002
Economic performance and near-term projections
- Real GDP contracted by 1.6 percent in 2021.
- Growth for 2022 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.
- Reduced activities in mining and LNG manufacturing and negative impacts of new pandemic variants on domestic services contributed to the 2021 slowdown.
- The risks to the outlook are tilted to the downside, with key downside channels identified as:
- potential new COVID-19 variants;
- increased global uncertainty associated with an escalation of the war in Ukraine;
- monetary tightening from the US;
- a larger-than-expected growth slowdown in China.
- Upside scenario identified: higher energy prices would further improve the terms of trade and restore fiscal positions in the short term, while partially contributing to build the buffers needed to ensure stronger intergenerational equity.
Inflation and price pressures
- Inflation was 2.2 percent at end 2021.
- Inflation increased in 2022 and pressures are expected to remain elevated in the short term owing to supply disruptions and higher food and fuel prices.
Structural change and sectoral developments
- The economy continues to diversify.
- The food/agriculture sector experienced double-digit growth.
- A new fertilizer sector commenced production.
- Mining and LNG manufacturing activities were reduced in 2021, weighing on overall output.
Fiscal and balance-sheet implications
- A positive terms of trade shock from higher O&G prices would help restore fiscal positions in the short term and contribute to building buffers for intergenerational equity.
Policy implications and recommendations
- Strong policy actions are needed to boost medium-term growth and foster resilience.
- Policies should aim to:
- strengthen resilience to pandemic-related and external shocks;
- leverage higher energy prices (when present) to rebuild fiscal buffers;
- support continued economic diversification, including expanding agriculture and new manufacturing like fertilizer;
- monitor and manage inflationary pressures arising from supply disruptions and higher food and fuel prices.
International Monetary Fund. Brunei Darussalam: 2022 Article IV Consultation-Press Release; and Staff Report (September 16, 2022).
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- 1brnea2022002