Supply shortages to keep inflation high in 2022, says CSPS

january 28, 2022

Consumers are expected to continue paying high prices for goods and services throughout 2022 as inflation will likely remain elevated due to supply chain bottlenecks, the Centre for Strategic and Policy Studies (CSPS) said.

Consumer inflation is projected to moderate to 1.3 percent this year from an estimated 1.7 percent in 2021, the think tank stated in its Brunei Economic Outlook 2022 report.

Pandemic-induced supply disruptions and shortages have pushed up inflation to historically high levels of 1 to 2.5 percent since January 2020, compared to the average of 0.3 percent from 2000 to 2019.

“As production capacity catches up to demand and supply bottlenecks gradually ease, prices are anticipated to fall, but remain at elevated levels,” CSPS said.

In 2021, there were notable price hikes in air transport, jewellery, vegetables, oils and meat products in Brunei.

Prices of vegetables and oils climbed 24 percent and 18 percent, respectively, due to limited supply from exporting countries.

Low cattle inventory was cited as the reason for the 30 percent jump in lamb and mutton prices


On the other hand, price declines were reported for clothing, furniture and accommodation services.

CSPS said prices of durable goods have increased sharply as consumers shift away from services towards goods such as consumer electronics and household appliances during the pandemic.

The cost of new cars has also risen significantly in Brunei and across the world, owing to the global shortage of semiconductors – a key component of new car models.

The think tank warned that sporadic COVID-19 outbreaks, particularly in Asia, may lead to production disruptions in the global value chain.

“Moreover, renewed trade tensions could exacerbate ongoing supply disruptions. In this scenario, inflation could surprise on the upside, forcing central banks to tighten monetary policy earlier than anticipated,” it added.

Supply bottlenecks and shortages have been widespread and persisted longer than expected.

Foreign analysts said the global supply chain crisis could even last for two years as a result of shipping backlogs, labour shortages and geopolitical tensions.

Noting that Singapore has recently tightened its monetary policy to ease inflationary pressure, CSPS said Brunei’s currency may face near-term upward pressure, which could help alleviate high import costs.

Brunei’s monetary policy is based on a currency board arrangement, in which the Brunei dollar is pegged at par to the Singapore dollar.