Brunei enters 2026 with improving diversification momentum, although the external environment has become more complex. The escalation of tariff measures and retaliatory actions, together with the conflict in the Middle East, has increased volatility in trade, logistics costs, and commodity prices, making the outlook for sustained growth more challenging. For Brunei, the main transmission channels remain hydrocarbon related revenues and investment conditions. Domestically, the main competitiveness constraint is power, particularly its reliability, adequacy, cost structure, including subsidies and collections, and its readiness to support high uptime industrial demand such as data centers and expanded downstream capacity. These issues will have a direct bearing on delivery in the final decade of Wawasan Brunei 2035.
Growth: Growth is expected to be moderate, supported mainly by downstream activities and services, but it remains sensitive to oil and LNG prices as well as plant uptime. ADB, AMRO, and the IMF project growth of around 1.6 to 2.4 percent in 2026, following the 4.2 percent expansion in 2024 and the subdued growth of 0.7 percent in 2025. Our own estimate, based on business cycle trends, points to growth of 1.3 percent in 2026.
Inflation: Brunei's high import dependence means that logistics disruptions and commodity price shocks, particularly those stemming from the Middle East conflict, pose upside risks to food and transport costs. Inflation could exceed 1 percent for 2026.
External Sector: The current account surplus is expected to remain sizeable, although it is projected to narrow to around 11 percent of GDP in 2026, down from 14.5 percent in 2024, reflecting higher import costs. Product and market diversification is continuing, but the export base remains closely tied to feedstock availability.
Power: Power system adequacy and reliability are becoming increasingly important to investors in ICT, data centers, and industrial development. The commissioning of Project SINAR, with around 48 MWp of solar capacity at Pulau Muara Besar, is a positive step. However, the medium-term demand outlook, driven by Hengyi Phase 2 and broader electrification, underscores the need for integrated resource planning.
Tariffs and Geopolitics: Elevated uncertainty stemming from US tariff measures and the conflict in the Middle East is likely to raise logistics costs and weigh on investor confidence. Brunei should strengthen its resilience through greater market diversification, stronger supply chains, and more active investor aftercare.
Fiscal Deficits: Fiscal deficits remain structural. AMRO and the IMF estimate that the fiscal deficit will be around 11.5 to 13 percent of GDP in 2026. In the aftermath of the Middle East crisis, the deficit could narrow significantly and possibly reverse to a surplus. Even so, a multi-year consolidation strategy remains necessary, centered on subsidy reform, expanding non-oil revenues, and improving spending efficiency to support long term fiscal sustainability.
Wawasan Brunei 2035 Delivery: Wawasan Brunei 2035 delivery will require bankable roadmaps for the five priority sectors, downstream oil and gas, ICT, food, tourism, and services, with clear links to power reliability and skills development.
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