ASEAN KEY DESTINATIONS
Brunei economy seen growing by 1% this year
THE Asian Development Bank maintains Brunei’s projected GDP growth in 2016 to be at one per cent and 2.5 per cent in 2017 in its latest flagship economic report.
The Asian Development Outlook 2016 projected Brunei’s GDP growth this year to be at one per cent and 2.5 per cent following a predicted rise in production and energy prices, which is unchanged since the initial publication in March.
According to the Manila-based lender, updated official data showed the economy contracting by 0.6 per cent in 2015, marking the third consecutive year of decline caused by subdued production of oil and natural gas. However, pace of contraction moderated as production outputs recover.
Production continued to pick up in the first quarter of 2016, generating a 3.6 per cent rebound in GDP. Crude oil output rose by 8.6 per cent per day in the first quarter. Natural gas output rose by 13.5 per cent per day.
But sectors other than hydrocarbons sagged in the first quarter. Services contracted by 0.7 per cent, mainly on falls in government and transportation services. Construction, textiles, and agriculture declined by double digits.
ADB noted on the demand side, household consumption rose by 5.2 per cent, but government spending, investment, and net exports fell. Investment from China rose sharply to US$86 million in the first four months of 2016, according to Chinese officials. It also noted companies from the area building a US$50 million plant to make carbon steel pipe, to be completed in 2017, and jetties for a US$2.5 billion oil refinery and aromatic cracker.
The first quarter GDP growth rate is unlikely to be sustained through 2016 because it is partly a base effect, the economy having started to improve after a sharp contraction in the first quarter of 2015.
“Also, government spending is constrained by lower global oil and gas prices that have slashed revenue. The budget for this fiscal year allocates US$390 million for infrastructure investment but cuts total government spending by 12.5 per cent,” the ADB said.
On balance, ADO 2016 forecasts are maintained for modest GDP growth in 2016 and a pickup in 2017 assisted by higher hydrocarbon production and prices.
ADB noted deflation has persisted for longer than expected, with the consumer price index falling by 0.6 per cent in the first half of 2016 following declines in the previous two years.
Prices have slipped this year for housing and utilities, transportation, and food. Consumer prices are now forecast to decline in 2016 before nudging higher in 2017 as global oil and commodity prices go up and domestic demand strengthens.
The Brunei dollar, which is pegged to the Singapore dollar, appreciated by four per cent against the US dollar in the first eight months of 2016.
Merchandise exports fell by 31.5 per cent in US dollar terms in the first half of 2016, reflecting weak oil and gas prices. Imports declined by 8.7 per cent. Having plunged by more than half in 2015, the trade surplus slid further in the first six months of this year to US$1.1 billion.
It noted that current account deficits are now forecast for next year as well as this year, for which the gap is projected to be wider than anticipated in March. Nevertheless, gross international reserves had risen by midyear to US$3.8 billion, covering 15 months worth of merchandise imports
The ADB said as a region, Southeast Asia is on track to achieve higher growth this year. Subregional growth is forecast to edge up from 4.4 per cent in 2015 to 4.5 per cent this year.
The Brunei Times
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