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NEWS UPDATES Asean Affairs     October 6,  2016  

IMF forecasts Brunei GDP to grow 3.9%

BRUNEI’S GDP is projected to grow at 3.9 per cent in 2017, the International Monetary Fund (IMF) said in its latest publication of its flagship report.

The World Economic Outlook, October 2016 projected that Brunei’s real GDP growth in terms of annual percentage change in 2016 will be at 0.4 per cent and rise to 3.9 per cent in 2017.

The report also projected Brunei’s real GDP growth to be at 13.2 per cent in 2021.

The new projections are a marked improvement from forecasts of negative two per cent in 2016 and a growth of 3.0 per cent in 2017, made as part of the report’s Regional Outlook update in May.

The outlook also projects consumer prices in the sultanate to fall an average of 0.3 per cent in 2016 and remain flat in 2017.

Moderate growth

The IMF in a previous report noted that Brunei’s GDP is projected to turn positive in 2016 on the back of a recovery in oil production, but growth will remain moderate until 2019.

On September 2, the executive board of the IMF concluded the 2016 Article IV consultation and reported that growth and macroeconomic balances are expected to strengthen markedly from 2019 onwards as new energy downstream facilities come on-stream.

Main risks arise from lower-for-longer oil prices that could severely erode the fiscal position, while delays in production from these new facilities could dampen the medium-term outlook.

Slow progress in structural reforms could also dim prospects for economic diversification.

The Brunei authorities are implementing measures to adjust to lower oil prices, raise productivity, enhance efficiency, and promote economic diversification, among others.

Fiscal adjustments began in the latter part of 2015, aiming to better prioritise expenditures toward economic diversification and efficiency.

A cabinet reshuffle in October 2015 led to a reconfiguration of ministries and agencies, resulting in an institutional structure that is better synchronised to improve economic performance and government delivery.

IMF noted new agencies are supporting reforms, with the Foreign Direct Investment Action and Support Center (FAST) facilitating a clear and efficient process for FDI in Brunei, and Darussalam Enterprise (DARE) providing a one-stop venue for wide-ranging support to small and medium enterprises (SMEs).

“Ongoing reforms have been reflected in recent improvements in business environment indicators. In addition, Brunei continues to use its participation in recent international trade agreements to widen market access and transform the domestic economy by raising competitiveness and making the business climate more predictable and transparent in order to attract new investment” said the IMF.

Global growth to stay weak

In comparison, the average GDP growth of Emerging and Developing Asia is expected to average about 6.5 to 6.4 per cent over the next five years.

In a prepared statement, Maurice Obstfeld, economic counsellor and director of the research department said that global growth remains weak, even though it shows no noticeable deceleration over the last quarter.

“The new World Economic Outlook sees a slowdown for the group of advanced economies in 2016 and an offsetting pickup for emerging and developing economies. Taken as a whole, the world economy has moved sideways,” he said.

Obstfeld noted that without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself — through the negative economic and political forces it is unleashing.

“We project global output growth at 3.1 per cent in 2016 and 3.4 per cent in 2017 — the same as in early July, shortly after the United Kingdom’s “Brexit” vote to leave the European Union.

“Within this broad outlook, however, we have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world,” he said.

Obstfeld also warned that economic global growth has been too low for far too long, and in many countries benefits of economic growth have reached too few and could cause detrimental political repercussions and negatively impact projections.

“The presumed recovery in 2017 and beyond, could be derailed by several, possibly interacting developments: a bumpy transition in China, a sharp further fall in commodity prices, a tightening in global financial conditions, or a sharp hike in trade barriers.

“Geopolitical tensions could flare up, adding to the humanitarian crises already afoot in the Middle East and Africa and further complicating the policymaking environment,” he added.

Obstfeld noted that an upside outcome would be the adoption by many countries of comprehensive, consistent, and coordinated policies that exploit synergies across instruments, time, and countries to boost growth and make it more inclusive.

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