May 17th, 2021
BANDAR SERI BEGAWAN – The rising cost of goods and services has not had a significant impact on poor households over the past year, according to the Centre for Strategic and Policy Studies (CSPS).
Both poor and rich households were found to have experienced “moderate” inflation rates, despite price hikes in consumer goods due to supply bottlenecks caused by the COVID-19 pandemic.
“In fact, poor households have seemingly experienced slightly lower inflation than rich households,” CSPS said in its latest Brunei Economic Update publication.
Using data from the Household Expenditure Survey 2015-16, the think tank analysed the spending patterns of the poorest 20 percent of Bruneian households with an average monthly income of $1,897 and the richest 20 percent of households who earned an average of $15,749 in a month.
CSPS attributed the lower inflation for poor households to falling housing rents and subsidised rates of electricity, water and gas, as poor households spend a large share (49 percent) of their expenses on housing and utilities.
“This has helped to alleviate upward pressure on the cost of living from food price spikes,” CSPS said.
The report added that poor households also spend a higher share on food and beverages (17 percent) than rich households (11 percent).
In contrast, rich households can afford to spend more on clothing and furniture, vehicles, private education, restaurant and hotels, and recreation.
CSPS said rich households experienced a higher inflation rate than poor households as the goods and services they spend more on have seen price increases, except clothing and footwear.
“However, the cost of living remains a concern for many households despite higher nominal incomes and moderate inflation, possibly due to psychological bias or because the standard of living that can be afforded by households’ income remains lower than they would like.
“For instance, individuals tend to place a greater weight on prices that have risen, rather than those that have fallen. Consumers may also take note of sudden large price changes rather than smooth price increases, and on purchases made frequently or recently,” CSPS added.
Brunei reports highest inflation rate in 12 years
Brunei’s inflation rose to 1.9 percent in 2020, the highest rate in 12 years and more than six times the average rate in the past two decades.
Figures from the Department of Economic Planning and Statistics (DEPS) showed positive inflation rates for 15 consecutive months since December 2019.
The sultanate recorded a deflation of -0.4 percent in 2019.
Citing statistics from DEPS, CSPS said most consumer price index categories posted moderate price increases between February 2019 and February 2021.
However, there were steep price hikes in vegetables, averaging 38 percent higher in February this year compared to two years ago, while the cost of accommodation services fell 27 percent in the same period.
CSPS said the pandemic has caused restricted labour supply, hampered production and increased logistics costs, pushing up prices of goods and services.
“Unfavourable weather conditions affected agricultural production, while travel restrictions barred local professionals from inspecting the halal status of imported meat, leading to domestic food shortages.
“In addition, increased food consumption and panic buying due to the travel bans further lifted prices,” the think tank added.
The depreciation of the Brunei dollar was also reported to have contributed to higher import costs.