IMF Staff Country Reports

This Selected Issues paper assesses the drivers of inflation in Brunei Darussalam. Inflation in Brunei has been on the downward trend since September 2022 being the first to hit disinflationary territory post-coronavirus disease amongst its regional peers. This appendix seeks to analyze the drivers of inflation in Brunei by employing an augmented Phillips curve model of inflation with global variables. By examining demand-side and supply-side factors, this paper aims to understand the relative importance of different inflation causes and their implications for economic policy. The estimation reveals that rather sudden decline in Brunei over the recent quarters is driven by supply factors, more specifically global supply chain developments in addition to moderate impacts by demands side factors. This motivates to keep conservative near term inflation outlook at 1.3 percent for 2024 as the global supply chain disruption is prone to substantial uncertainty and always evolving.