BANDAR SERI BEGAWAN – Brunei’s gross domestic product (GDP) contracted by 1.2 percent year-on-year in the third quarter of 2018, following a 2.8 percent decline in the previous period due to decreasing gas and methanol production.
“[The decline] was mainly associated with a 75.2 percent decrease in net exports of goods and services”, the Department of Economic Planning and Development (DEPD) said in a report released Thursday.
Statistics showed that in Q3 2018, the oil and gas sector declined by 2.4 percent year-on-year, due to a 7.4 percent drop in gas and methanol production and 0.7 percent drop in oil and gas mining.
Brunei’s GDP at current prices was estimated at $4.5 billion in Q3 2018, with oil and gas accounting for 57.3 percent of economic activity.
Oil and gas also represents 90 percent of government revenue.
Non-oil and gas sectors grew 0.4 percent year-on-year.
The industrial sector — which covers manufacturing of liquefied natural gas and methanol, construction and oil mining — was valued at $2.86 billion in Q3 2018.
Meanwhile, the services sector was valued at $1.66 billion in the same period and the agriculture, forestry and fisheries sector was valued at $47 million.
The DEPD said capital expenditure in the private sector continued to rise, posting 33.1 percent growth year-on-year.
Economic outlook
Coming out of four years of recession, the sultanate posted 1.3 percent GDP growth in 2017.
When oil prices hit US$80 a barrel last October — a four-year high — the IMF projected Brunei’s economy to grow by 2.3 percent in 2018.
But the market flipped from mid-year concerns about an oil shortage to fears of a renewed crude glut after the United States, Russia and Saudi Arabia all boosted output.
Oil prices lost more than a third of their value in the fourth quarter, ending a 2½-year recovery following the 2014-2016 downturn.
Brunei’s economic forecast was revised to 0.5 percent growth for 2018, after the ASEAN+3 Macroeconomic Research Office (AMRO) conducted a preliminary assessment last November.
The report stated that real GDP grew at 5.2 per cent in Q4 2017, but slowed to 2.6 per cent in Q1 of 2018 and was -2.8 per cent in Q2 2018, as oil and gas production was disrupted due to unscheduled maintenance of facilities.
“It is important for the authorities to accelerate economic diversification as well as improve spending efficiency in order to enhance the long-term growth prospects of the economy,” said AMRO Lead Economist Dr Siu Fung Yiu.
With incoming foreign direct investment, and the opening of the Hengyi crude oil refinery this year, AMRO has projected 2.1 percent growth for Brunei in 2019.
But with geopolitical factors remaining a big variable in 2019, it could be more difficult for the oil market to reach equilibrium and investors may have to prepare for more volatility.