Brunei: Economic growth projected at 3.5pc next year
The Asian Development Bank (ADB) projected Brunei’s economic growth at 3.5 per cent next year compared to three per cent predicted earlier.
The Asian Development Outlook (ADO) 2021 published yesterday also stated that Brunei’s economic growth is trimmed to 1.8 per cent in the latest ADB update of its flagship economic publication, down from their earlier forecast of 2.5 per cent in April this year.
ADB, in its latest report, said Brunei’s growth in the first quarter (Q1) of 2021 contracted by 1.4 per cent year-on-year on declines in government consumption, investments, and exports that more than offset the growth in private consumption.
Exports of goods and services decreased by 4.3 per cent by volume, primarily on plunging sales of mineral fuels. Government consumption fell by 9.8 per cent, as measures to contain the COVID-19 outbreak affected some government services. Investment fell by 5.7 per cent, with declines in both private and government capital spending.
The contraction in Q1 growth was mainly driven by lower oil and gas production (down 3.1 per cent) and manufacturing of natural gas (down 11.4 per cent). Services output recovered slightly. This was a broad recovery, however, spanning wholesale and retail trade, restaurants, business services, information and communication as well as real estate and personal services. The recovery in services is an indication that the effects of COVID-19 on the economy are receding.
Even so, output in several other sectors declined, particularly transport, government services, and hotels. Because of weaker-than-expected gross domestic product (GDP) growth in Q1, the update revises down its forecast for growth for the full year from the projection in ADO 2021.
The forecast for 2022 is higher, due largely to an expected rise in production and investment at Hengyi Industries’ refinery project and in state-owned Brunei Fertilizer Industries’ ammonia and urea production plan. The inflation rate in the second quarter (Q2) was at 1.3 per cent, lower than the peak of 2.5 per cent in June 2020.
All components of the consumer price index (CPI), except for transport and restaurants and hotels, rose at a softer pace. Inflation is expected to continue moderating in the near term due to the large output gap. Although exports were slightly down in the first four months of this year, it recovered in May and June to post growth of 33.6 per cent in the first half of 2021. They are expected to continue to rise over the rest of 2021.
ADB said higher global oil and liquefied natural gas prices this year and next, compared with their levels in 2020, will support growth in goods exports. As exports pick up, imports will also rise—their value was up 169.8 per cent from January to June—on the anticipated strengthening of domestic demand and inputs, such as mineral fuels for Hengyi’s refinery.
The net result of all this will be a lower current account surplus this year than was forecast in ADO 2021, but the surplus will still be higher than 2020’s.
Meanwhile, regionally, the ADB lowered its 2021 economic growth outlook for developing Asia, amid continuing concerns over the COVID-19 pandemic.
ADB also forecast growth of 7.1 per cent this year. That compares with a projection of 7.3 per cent in April.
The growth outlook for 2022 is raised to 5.4 per cent from 5.3 per cent. New COVID-19 variants, renewed local outbreaks, the reinstatement of various levels of restrictions and lockdowns, and slow and uneven vaccine rollouts are weighing down the region’s prospects.
“Developing Asia remains vulnerable to the COVID-19 pandemic, as new variants spark outbreaks, leading to renewed restrictions on mobility in some economies,” said ADB Acting Chief Economist Joseph Zveglich Jr.
“Policy measures should not only focus on containment and vaccination, but also on continuing support to firms and households and reorienting sectors in the economy to adapt to a ‘new normal’ once the pandemic subsides to kick start the recovery.”
COVID-19 cases in developing Asia have risen since the Delta variant emerged in April. New daily cases peaked at 430,000 in May. More than 163,000 new daily cases were recorded on August 31. Meanwhile, vaccination progress in developing Asia remains uneven and lags behind that of advanced economies. As of August 31, 28.7 per cent of the region’s population had full vaccine protection, compared with 51.8 per cent coverage in the United States (US) and 58.0 per cent in the European Union (EU). The recovery path within the region remains uneven. East Asia’s growth forecast for this year has been raised to 7.6 per cent from 7.4 per cent in April, as a surge in global demand fuels exports from the region. East Asia’s growth prospects for 2022 are unchanged at 5.1 per cent. Growth projections for the People’s Republic of China, the region’s largest economy, remain at 8.1 per cent in 2021 and 5.5 per cent in 2022.
On Southeast Asia, ADB said the forecasts for Southeast Asia and the Pacific have also been revised downward, as economies in these subregions continue to grapple with new virus variants, continued lockdowns and restrictions, and slow vaccine rollouts. Southeast Asia’s growth projections for 2021 and 2022 have been lowered to 3.1 per cent and five per cent from forecasts of 4.4 per cent and 5.1 per cent in April. The Pacific’s economy is set to contract 0.6 per cent this year, compared with 1.4 per cent growth projected in April, before expanding 4.8 per cent in 2022.
Inflation in developing Asia is expected to remain in check, at 2.2 per cent this year and 2.7 per cent in 2022. The current trend of higher international commodity and food prices could stoke inflation in some of the region’s economies.
The ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.