Azlan Ottoman

Brunei’s economy will be strengthened by improving the external environment in 2021 and 2022, with gross domestic product (GDP) growth of 2.5% this year and 3% next year, according to the Asian Development Bank’s (ADB) flagship economic publication. It is expected to be done. , Asia Development Outlook (ADO) 2021, recently released.

Growth in 2021 will be supported by a recovery in global demand and rising oil and gas prices, increasing government revenues and supporting government consumption. Private consumption is expected to grow as the economy continues to strengthen.

GDP is projected to rise in 2021 and 2022, supported by strong export growth from the Hengyi plant and rising oil and gas prices. However, increased imports due to factory expansion and continued demand for inputs will ease trade and current surpluses in both years.

The main risks to a strong economic outlook are weaker than expected global recovery, large delays in foreign direct investment, and unplanned oil and gas supply disruptions.

ADB added that exports will increase due to increased production at the Hengyi plant and Brunei Fertilizer Industries, which will begin production by the third quarter of 2021. The private investment and construction industry will be strengthened by the construction of a Halal meat processing and distribution center and the Phase 2 expansion of the Hengyi plant, which is scheduled to begin in 2021, worth approximately US $ 13 billion.

When completed in 2024, the plant is projected to increase its oil refining capacity from the current 8 million tonnes per year to 22 million tonnes per year. GDP growth is projected to be 2.5% this year and 3% next year.

ADB also said that although growth slowed sharply in 2020 due to the COVID-19 pandemic, growth was still achieved due to the economic contributions of the new oil refinery and petrochemical plant.

Economic growth in 2020 was 1.2%, well below the 3.9% growth rate in 2019. The government will partially fund the salaries of private sector SMEs (MSMEs) and postpone pandemic-affected individual and corporate loan payments to mitigate the effects of the COVID-19 pandemic. We have taken various measures, such as doing so.

Last year’s main growth drivers were net external demand due to increased exports of oil and gas products from Hengyi Industries, which started Phase 1 of the oil refining and petrochemical business in November 2019, and import growth due to a reduction in service imports. It was a slowdown.

Hengyi’s Phase 1 investment totaled US $ 3.5 billion. Fixed investment fell sharply due to reduced construction and investment in the oil industry. Government consumption fell 9.6% in 2020, while private consumption increased 7.3%.

Increased production at Hengyi’s oil refineries and petrochemical plants, strong export growth, and adequate expansion of household spending offset weaknesses in other parts of the economy.

Production of other petroleum and chemical products more than quadrupled last year. However, service output shrank by 1.9%, and COVID-19 travel restrictions hit the hotel, restaurant and travel industry.

Inflation accelerated from -0.4% in 2019 to 1.9% in 2020 as the COVID-19 pandemic increased prices in most product categories centered on food and services. Price increases of this magnitude were last seen in 2008, when inflation averaged 2.1%.

Significant volume and price declines in crude oil and liquefied natural gas affected the nominal value of exports in 2020.

Regarding the economic outlook, ADB said the short-term growth outlook is constrained by a fragile external environment as major trading partners continue to work on the COVID-19 pandemic.

The government has succeeded in containing the COVID-19 epidemic, but the progress of domestic and global deployment of vaccines determines the strength of the economy.

On the other hand, high inflation in 2020 is unlikely to follow 2021 and 2022. This is because the relaxation of some supply constraints caused by the COVID-19 pandemic puts downward pressure on prices.

Global inflation is expected to rise in 2021 due to the resurgence of economic activity, but inflation may remain restrained as overall demand remains weak. The one-on-one pegs of Brunei dollars and Singapore dollars and the domestic price subsidies in place also need to continue to curb inflation. Inflation is projected to be 0.7% over the next two years.

Brunei Darussalam is expected to remain in the trade surplus in the short term after hitting a surplus of US $ 1.3 billion in 2020. The trade surplus will continue to be supported by exports of oil, gas and petrochemicals.

ADB also said that despite the positive economic outlook, Brunei’s low productivity of MSMEs was a major policy issue and existed before the COVID-19 crisis.

However, the pandemic has highlighted low productivity, which is a short-term and medium-term policy concern. MSME is economically important as it accounts for 97.3% of the country’s 6,157 companies.

To be productive in MSMEs, we need a clear understanding of human capital development, imported raw materials, sector diversification, and the role of foreign market orientation in these businesses.

The COVID-19 pandemic has hit MSMEs in some sectors, including hotels, accommodation and food services. These activities account for 10.8 percent of MSME’s total employment.

The outlook for MSMEs in the wholesale and retail industry (21.5% of employment) depends heavily on the recovery of domestic consumption. The manufacturing MSME (22.7% of MSME revenue) and the mining and quarrying companies (33.4% of revenue) depend on foreign markets, so which is the global COVID-19 pandemic that has not yet been elucidated. I still don’t know if it will be. It will affect their business in 2021.

“The 2019 Global Entrepreneurship Index shows that Brunei Darussalam is far behind international entrepreneurship standards, especially necessary to start a business and process innovation. Brunei Darussalam can learn a lot from the good practices of neighboring countries. “