Brunei Darussalam: Non-oil and gas sector leads economic recovery


The resumption of economic activities has provided the impetus for the non-oil and gas (O&G) sector to recover, particularly the services sector.

SINGAPORE (May 8): Economic activities in Brunei Darussalam have picked up since mid-2022.
Thanks to high vaccination rates, daily new cases of Covid-19 have declined sharply since April 2022, enabling containment measures and border restrictions to be lifted.

The resumption of economic activities has provided the impetus for the non-oil and gas (O&G) sector to recover, particularly the services sector. The country has also benefited from higher O&G earnings, helping to improve the external position and restore fiscal buffers.

Continuing diversification in the non-O&G sector, and faster structural reforms, will help foster resilience and put the economy on a more solid footing in the longer term.

These conclusions are highlighted in the 2022 Annual Consultation Report on Brunei Darussalam published by the ASEAN+3 Macroeconomic Research Office (Amro). The report is based on AMRO’s Annual Consultation Visit to Brunei Darussalam in November 2022, and data and information available up to January 2, 2023.

“Brunei Darussalam is expected to record a negative growth of 1.2 per cent in 2022,” Amro said in a statement, adding that the weak growth in 2022 mainly reflects the unexpected downturn in the upstream O&G production in H1 2022.

“The contraction in the O&G production appears to have bottomed out, but the ongoing rejuvenation of offshore O&G fields is expected to continue to have some negative effects on growth. The outcome from the rejuvenation efforts would result in improved asset reliability and production availability.

“On a positive note, the diversion of domestic gas supply to the downstream activities and the recovery in the services sector have contributed to stronger performance of the non-O&G sector. Growth is expected to recover to 2.8 percent in 2023.”

Amro noted that Brunei Darussalam’s inflation has risen to a multi-year high, mainly on rising food and transport prices. As a net food importer, elevated global food prices, particularly in the first half of 2022, contributed significantly to the broadening of food inflation.

A spike in prices of transport services and vehicles added to upward pressure on inflation. As a result, inflation remained high at 3.7 percent in 2022 before easing to 2.5 percent in 2023.

The external position remains strong, with an estimated overall balance of payments of US$1.1 billion (6.4 per cent of GDP) in 2022. This reflects a significant widening of the current account surplus (12.8 per cent of GDP) amid favourable O&G prices and robust activities in the non-O&G sector.

The current account surplus is projected to remain large at 9.9 per cent of GDP in 2023. Surging O&G revenue means the country’s fiscal position has improved considerably.

As a result. the fiscal balance shifted from a deficit of 5.2 per cent of GDP in FY21 to a surplus of 0.5 per cent of GDP in FY22 before reversing to a small deficit of 1.3 per cent of GDP in FY23.