BANDAR SERI BEGAWAN – Revenue losses in the oil and gas industry continued to hurt the Brunei economy in the first quarter of 2021, with the gross domestic product (GDP) contracting 1.4 percent year-on-year.
The energy sector’s poor showing undermined economic growth for two consecutive quarters as the GDP also decreased 1.4 percent in the final quarter of last year.
Data from the Department of Economic Planning and Statistics (DEPS) showed the energy sector extending its downward trend of 5.3 percent in Q1 2021, after posting negative growth in all four quarters of 2020.
In its Q1 2021 GDP report released last weekend, DEPS said lower oil and gas output led to a dip in earnings.
The liquefied natural gas sub-sector reported a 11.4 percent fall in production year-on-year.
Crude oil output declined 1.2 percent from 116,300 barrels a day in Q1 2020 to 114,900 barrels a day in the first quarter of this year.
Natural gas output was also scaled down to 32.6 million cubic metres a day in Q1 2021, compared to 34.8 million cubic metres a day in the preceding year.
DEPS attributed the reduction in crude oil and natural gas production to an “unscheduled shutdown” in an offshore platform.
Major oil producers in the OPEC Plus group last Sunday agreed to increase production after US oil prices briefly hit a six-year high on July 6 due to a dispute between Saudi Arabia and United Arab Emirates on raising supply.
Brent crude – the global benchmark of oil prices – shrank 6.8 percent to $68.62 a barrel, a day after the OPEC Plus countries reached a compromise to expand output from August.
The Centre for Strategic and Policy Studies previously said commodity prices are unlikely to return to pre-pandemic levels this year.
Rising global coronavirus cases driven by the Delta variant have further clouded the demand outlook for oil and gas as countries around the world return to lockdowns.
Downstream sector stays in positive territory
Fuelled by Hengyi Industries’ export of petrochemical products, the downstream sub-sector maintained its strong performance with a 3.1 percent growth in Q1 2021.
Downstream activities were the largest driver of Brunei’s economic growth last year, with the manufacturing of petrochemicals soaring 323.9 percent.
Hengyi Industries has exported 9.46 million metric tonnes of petrochemical products worth US$4.08 billion since its oil refinery started operations in November 2019.
Construction industry faces severe slump
In Q1, the industrial sector reported a 3.1 percent drop in revenue, partly owing to the 16.6 percent slump in the construction sub-sector.
Travel restrictions have also affected the hiring of migrant workers in the construction sector. At present, the government only issues permits to foreign workers deemed as essential workers.
Migrant workers made up 78 percent of the total workforce in the construction industry, according to DEPS’s Labour Force Survey 2019.
Bright spots in the industrial sector included a 30.7 percent surge in manufacturing of food and beverage products and 22.6 percent rise in apparel and textile production.
Services sector bounces back to growth
The services sector returned to growth for the first time since 2019, recording a 2.2 percent increase in Q1.
With limited business activities due to COVID-19 restrictions, the services sector had posted a 1.9 percent contraction last year.
Business services showed the largest growth with 17.9 percent in Q1, followed by the wholesale and retail trade sector with 9.6 percent and health services at 8.6 percent.
However, the air transport sub-sector continued to endure a steep decline of 87.6 percent with no indication of recovery this year as Brunei’s borders remain closed to non-essential travel.
Exports of goods and services also slid 4.3 percent, while imports climbed 21.5 percent year-on-year.