Brunei Economic Update July 2021

HIGHLIGHTS

Recent Developments

  • Although global economic activity has gained pace, the recovery is uneven amid highly unequal vaccine access. COVID-19 caseloads have fallen sharply in advanced economies as vaccine rollouts have been rapid, but new infections are still elevated in many parts of the world. The spread of the Delta variant is clouding the global economic outlook.
  • Global trade has continued to grow strongly and freight rates have soared due to port congestion and shortage of containers. Commodity prices have retraced in part due to a moderation of Chinese demand, and global financial conditions have tightened on expectations of stronger growth and higher inflation.
  • The Brunei economy contracted by 1.4 percent y/y in Q1, following a decline in the previous quarter, largely due to lower crude oil, natural gas, and LNG production. The services sector registered modest growth in Q1, after four consecutive quarters of contraction.
  • Brunei’s trade balance returned to surplus following strong exports of crude oil and other petroleum and chemical products in March and April, despite record-high levels of mineral fuel imports. Inflation moderated to 1.1 percent y/y in April and May. The fiscal deficit narrowed slightly due to higher oil receipts and tax revenue.

 

Special Feature: Economic diversification in oil-exporting countries
  • Export concentration in oil-exporting countries is much higher than the rest of the world, and the gap between the two groups has widened over the past half-century. Oil-exporting countries achieved some diversification success from the mid-1980s to the late-1990s when oil prices were in a slump. However, this trend reversed during the decade-long oil price boom in the 2000s.

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Brunei Economic Update April 2021

HIGHLIGHTS

Recent Developments
  • A global economic recovery is underway, after a very deep recession in 2020. However, the recovery paths have been uneven. China has returned to pre-pandemic levels of economic activity ahead of other major economies. Countries with slower vaccine rollouts, limited policy support, and those more reliant on tourism are likely to recover more slowly.
  • Global trade and commodity prices have surpassed pre-pandemic levels. Inflation expectations are rising and yield curves have steepened. Capital flows to emerging markets have moderated amid rising yields and concerns about the pace of monetary policy normalisation in the United States.
  • The Brunei economy contracted by 1.4 percent y/y in Q4 due to a decline in oil and gas and services output. For 2020 as a whole, GDP growth was 1.2 percent. The fiscal deficit widened to 15.8 percent of GDP in 2020 due to sharply lower oil and gas revenue.
  • Domestic tourism has benefitted from border closures. Hotel occupancy rates have surged and retail sales have increased markedly. However, international travel and tourism remains deeply depressed.
Special Feature: RECENT PRICE SPIKES IN BRUNEI: WHO IS HARDEST HIT?
  • Positive inflation rates have been recorded for 15 consecutive months through February 2021. Analysis by household income groups suggests that poor households experienced lower inflation than rich households. This reflected falling housing rentals and stagnant prices of electricity, water, and gas due to subsidised tariffs, as housing and utilities make up a much larger share of poor households’ expenditure.

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Brunei Economic Update October 2020

HIGHLIGHTS

Recent Developments
  • The global economy contracted in the second quarter of 2020 as COVID-19 containment measures severely restricted labour supply and disrupted production. Output in the United States plunged by a record 9.1 percent year-on-year (y/y) in Q2. By contrast, output in China rebounded swiftly, growing by 3.2 percent.
  • After a turbulent March, financial conditions have improved. Major stock markets rallied, capital flows returned to emerging markets, and most regional currencies strengthened against the U.S. dollar. Oil prices have recovered somewhat but remain two-thirds of their January levels.
  • The Brunei economy grew 2.8 percent y/y in Q2, but shrank 2.1 percent on the quarter. Growth has been largely supported by the production of petrochemicals.
  • The pandemic has hit travel and tourism hard. Brunei’s air transport and hotels sub-sectors contracted by more than 90 percent and 50 percent in Q2, respectively, while the restaurants sub-sector contracted by 20 percent. On the other hand, the telecommunications sub-sector expanded by about 3 percent.
Special Feature: Fiscal policy in Brunei during past oil price crashes
  • Since 1970, there have been six episodes of oil price collapses before COVID-19 struck. Brunei’s fiscal response has varied across the episodes, depending on the nature of the shocks. Fiscal spending was cut substantially during the 1985-86 and 2014-16 oil price crashes. By contrast, spending held steady during the 1997-98 Asian financial crisis and increased during the 2008-09 global financial crisis.

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Brunei Economic Update July 2020

HIGHLIGHTS

Recent Developments
  • The COVID-19 pandemic has severely disrupted global economic activity. The global economy in 2020 is projected to suffer the deepest recession since World War II, despite unprecedented policy support.
  • Pandemic containment measures, such as international travel bans and domestic lockdowns, while necessary to control disease spread, have brought global travel and tourism to a virtual halt.
  • Brunei has managed to control its COVID-19 outbreak by imposing containment measures early. This has, however, affected activity in several service sub-sectors. In Q1, growth moderated to 2.4 percent but growth in Q2 is expected to experience a sharper slowdown due to stringent measures implemented in mid-March.
  • Brunei’s growth in 2020 has been revised downwards to between 1 and 2 percent.
Special Feature: Impact of COVID-19 in Brunei using near real-time measures
  • Using Google search data as a proxy for consumer demand, the travel-related and consumer-facing service sectors in Brunei experienced steep contractions from mid-March to May when containment measures were most intense. Economic activity has gradually recovered since early June.

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