BANDAR SERI BEGAWAN – The Brunei economy suffered its biggest contraction in five years, closing out 2021 with a 1.6 percent annual negative growth rate as oil and gas production woes continued to impede recovery.
In its worst economic recession since the oil price crash in 2016, Brunei recorded declining gross domestic product (GDP) growth in all four quarters of 2021.
Official figures showed that the economy shrank 1.4 per cent in the final quarter of 2021, amid COVID-19 restrictions that affected some economic sectors.
The hydrocarbon sector maintained its poor performance from 2020, falling 4.8 percent last year despite rising oil prices, which climbed 89.7 percent to an average of US$82 a barrel in Q4 2021.
Accounting for 50.4 percent of the Q4 GDP, the oil and gas sector had been facing decreasing output and was cited as the main reason for Brunei’s weak economy.
“The reduction in crude oil and natural gas production was due to shutdown turnaround activities,” the Department of Economic Planning and Statistics (DEPS) said in a press statement issued last weekend.
It added that the decline in liquefied natural gas production was due to limited gas supply and maintenance activities at one of the LNG plants.
Oil output decreased from 105,000 barrels a day in Q4 2020 to 103,400 barrels a day in Q4 2021.
Earlier in Q3 2021, Brunei’s crude oil production slumped to a record low of 97,100 barrels a day following COVID-19 disruptions.
LNG output also tumbled from 901,100 million British thermal units per day (MMBtu/d) in Q4 2020 to 774,100MMBtu/d in the same period last year.
While the energy sector has taken a hit over the past two years, the government had said it planned to ramp up oil and gas production of 300,000 barrels of oil equivalent a day this year.
Analysts projected the Brunei economy to bounce back from recession in 2022 as higher energy prices are expected to boost growth in the hydrocarbon sector and most COVID control measures have been lifted.
The improved economic outlook was also attributed to the downstream oil and gas sector, which is set to expand with state-owned Brunei Fertilizer Industries starting its ammonia and urea production in Q1.
Surprise revenue gain for services sector
The non-oil and gas sector – including downstream oil and gas activities – maintained its positive momentum with a growth of 1.4 percent year-on-year in the last quarter of 2021.
The growth was spurred by the services sector, which sprang a surprise 2.1 percent rise in Q4 2021, when Brunei tightened COVID curbs during its second wave of infections.
Brunei began easing restrictions on November 19, including allowing dine-ins at restaurants and businesses were able to operate at half of their usual capacity.
Overall, the non-oil and gas sector reported an annual GDP growth of 2 percent last year.
However, the downstream sector experienced its third consecutive quarter of revenue losses with a 2.5 percent decrease in Q4 – a stark reversal as downstream activities were the largest driver of Brunei’s economic growth in 2020.
Buoyed by the return of more travellers, the air transport sub-sector saw the highest growth of 83.6 percent among all sectors in the last quarter of 2021.
Other sub-sectors in positive territory were land transport (45.6%), other transport services (11.6%), finance (4.7%), government services (4.6%), business services (3.1%) and health (2.6%).
DEPS said the increase in life insurance take-up had resulted in the expansion of the finance sub-sector.
In contrast, services sub-sectors that struggled with earnings losses included restaurants (-9.8%), wholesale and retail trade (-4.2%), and water transport (-3.7%).
The services sector contributed to 35.4% of Brunei’s GDP in the fourth quarter.
Meanwhile, DEPS said the agriculture, forestry and fishery sector had been showing encouraging performance since Q2 2020.
In Q4 2021, this sector increased 6.1 percent on the back of rising small-scale and commercial fishing activities as well as a jump in sawn timber production.