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.

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.