Brunei Darussalam finds itself at a juncture marked by a convergence of challenges and opportunities. In the global context of ongoing pandemic recovery, the nation is steadfastly advancing its diversification initiatives, aimed at realising its vision of becoming a dynamic and sustainable economy.
The Ministry of Finance and Economy (MoFE) maintains a dedicated commitment to its pivotal role as a leading facilitator. Ensuring alignment among all stakeholders to harmonise with the economic blueprint and the goals outlined in Brunei Vision 2035 remains a steadfast objective.
The ministry has outlined a strategic roadmap for economic diversification, where five priority sectors have been identified as pivotal contributors to advancing this diversification agenda. The five sectors are oil and gas downstream sector, food, ICT, tourism and services.
Shifting landscapes
The International Monetary Fund (IMF) underscored significant improvements in Brunei’s labour market, marked by a notable decrease in the unemployment rate from 7.3 per cent in 2020 to 5.2 per cent in 2022.
Concurrently, the fiscal landscape has witnessed a substantial transformation, shifting from a deficit of 5.1 per cent of gross domestic product in FY2021/22 to a surplus of 1.6 per cent in FY2022/23. This positive shift is attributed to windfall revenues generated by higher global energy prices. The fiscal strategy has pivoted towards promoting recovery and diversification through increased public investment.
Sustained growth on the horizon
The Organisation for Economic Cooperation and Development (OECD) anticipates a robust expansion in Brunei’s economy, forecasting a growth rate of 3.2 per cent for both 2023 and 2024. This optimistic outlook is attributed to strategic investments in the fertiliser industry and the impact of increased oil and gas prices resulting from geopolitical events.
Meanwhile the ASEAN+3 Macroeconomic Research Office (AMRO) Brunei Darussalam’s economic outlook for the current year is projected to grow by 2.4 per cent, marking a significant upswing compared to the 0.2 per cent recorded in the previous year.
This growth is anticipated to be predominantly driven by the nonoil and gas sector as the robust performance of subsectors such as agri-food, finance, transportation, and tourism is expected to counterbalance the sluggish activities in upstream oil and gas production.
Notably, the services sector within the non-oil and gas domain continues to exhibit positive momentum, especially in finance and transportation as postpandemic recovery gains traction.
Despite challenges faced by the rejuvenation efforts in the oil and gas sector, optimism surrounds an anticipated improvement in production in the near future. The downstream industry holds positive prospects, with planned diversification into new products, providing impetus to growth in the short term.
Brunei also ranked ninth among 39 countries in the Asia-Pacific region, and its overall score is above the regional and world averages in the annual Index of Economic Freedom 2023 from The Heritage Foundation which showcases the level of economic freedom in every country on a scale of 0-100, looking at factors such as property rights, tax burdens and labour freedom.
The country’s economic freedom score is 65.7, making its economy the 48th freest in the 2023 Index. Its score is 0.9 points better than last year.
According to the report, Brunei’s economy is characterised by a relatively high level of market openness that facilitates trade and investment, a legal system that generally secures private property, and macroeconomic stability. The investment environment is generally efficient and transparent, but a more streamlined regulatory framework would enhance economic freedom and competitiveness.