The year 1998 registered a slow growth of real GDP of 1.0% compared to 3.5% in 1996 and 4.0% in 1997. The decline was the result of the fiscal consolidation measures adopted by the government earlier in the year and the depressed world oil prices which adversely affected the petroleum sector. The effect of the former was a decline in the construction sector, the second largest contributor to the real GDP growth. This also had a spill-over effect on related sectors namely transport and communication, retail, wholesale and restaurant, banking, insurance and finance. Mid-way through the year, however, the government announced a supplementary development allocation to boost the construction sector as well as an additional monthly cost of living allowance (COLA) for civil servants.

The fall in the prices of both crude oil and liquefied natural gas, by some 37% and 25% respectively over the previous year, whilst maintaining oil production at around 150,000 to 160,000 barrels per day showed the contribution of the oil sector to GDP to continue declining. The GDP at current prices increased from BND$8,051.0 million in 1997 to an estimated BND$8,110 million in 1998. The contribution of the non-oil sector, which comprised the government and the non-oil private sectors, to the nominal GDP increased from 64.4% to 66.5% during the same period.

Brunei’s dependence on imports renders it susceptible to external inflationary conditions. Certain subsidies, including public utilities, play a part in controlling inflationary pressures. Inflation, as measured by the rate of increase in the consumer price index (CPI) was just under 1.0% in 1998. The government’s efforts to reduce import duties on some consumer items, the moderate inflation rate of neighbouring trade partners as well as cheaper commodities from ASEAN countries due to the depreciation of regional currencies and the opening up of the retail trade contributed to this price stability. However, the effect of the relatively stronger Brunei dollar vis-à-vis the regional currencies saw an increasing number of local consumers spending away in the neighbouring countries.

Brunei’s major exports are crude oil and natural gas, which account for some 90% of the total exports. Re-export items and garments accounted for the rest. Japan remains Brunei’s major trading partner, accounting for some 55% of total exports. Other export markets include the Republic of Korea, Thailand and Singapore. In 1998, some of the exports to both Korea and Thailand have been deferred due to the financial crisis affecting these countries.

In 1996, imports increased by 15.3% over those of 1995, but this was reduced to 10.3% in 1997 to B$3,154 million. The main imports included machinery and transport equipment, food, chemicals and manufactured articles. Brunei’s imports remained subdued in 1998. This was attributed to the slowdown in the construction sector, following the initial budget cut as well as the appreciation of both the US and European currencies causing imports of commodities from these countries to be more expensive.

The overall trade balance continued to be more favourable in 1998. Even though the increase in exports of crude oil and natural gas has slowed down, imports have fallen much further.

The total population of Brunei in 1998 was estimated at 324,000, growing at around 3.1%. The labour force grew at 1.5% in 1998 compared to 3.4% in 1997. The slowdown in the construction sector, which spilled over to the other mainly services sectors have seen an increasing number of migrant workers, mainly from the Southeast Asian region, returning home. Female labour force participation rates have been on the rise in recent years, another factor in the increase in the growth of the labour force. The development of local skills and entrepreneurs are given much emphasis in the current Seventh National Development Plan (1996-2000) which aims to meet the challenge of a more diversified economy.

The government has run a budget deficit in recent years, reflecting somewhat higher outlays in infrastructure and additional domestic demand. The budget balance in 1998 is estimated to register a deficit of 6% of the GDP. The government will continue to adopt a more moderate expenditure during the current plan. Some potential government agencies would be corporatised and a number of projects, which were traditionally undertaken by the government, have now either been privatised or commercialised. The authorities are presently stepping up efforts to increase alternative sources of revenues to supplement the falling oil and gas revenues.

MACROECONOMIC OUTLOOK

GDP is not expected to pick up strongly in 1999 with world oil prices continuing to be depressed. However, the non-oil sector, particularly construction and service-related activities, is expected to be boosted as Brunei is preparing itself to host three major events, namely the Southeast Asian Games in 1999, the APEC Summit in 2000 and in 2001, Visit Brunei Year. The government’s contribution would ensure the stability of economic growth at around 1% to 2%.

Inflation is expected to be maintained at around 2%. In addition, tight fiscal policies to prevent further a build up of inflationary pressures and enforcement of government regulations on prices of essential goods and services will continue.

The trade balance is expected to be favourable during the year. Exports are expected to increase by 6.5% in 1999 while imports are forecast to increase by 2.5%.

• The formation of a Brunei Darussalam Economic Council with membership from public and private sector to expedite private sector development;
• Maintaining a prudent fiscal policy but injecting sufficient capital outlays to sustain the growth in the private sector;
• Promoting privatisation policies to enhance management’s efficiency and productivity and to reduce the size of the public sector;
• Maintaining price stability;
• Improving the investment climate to encourage FDI; and
• Establishing niche industries and enhancing human resources development;
• Realising Brunei’s role in the BIMP-EAGA region in such areas as a service hub for trade and tourism and a financial services center.

Brunei Darussalam: Overall Economic Performance

Source: Data are as submitted by member economies, unless otherwise specified.

Table 2. Forecasting Summary (% change from previous year)