Brunei seeks sustainable growth path

Rising oil prices have allowed oil-rich Brunei to enjoy a budget surplus this year, but such good news also raises the question about its sustainability, analysts said.

Mohd Amin Liew Abdullah, Brunei's second minister of finance and economy, has proposed a budget of 5.96 billion Brunei dollars ($4.4 billion) for the financial year 2023-24 at the 19th session of the Legislative Council on Monday. Brunei will be closing the fiscal year on March 31 with a budget surplus of roughly B$100 million as revenue is forecast to hit B$6 billion while government expenditure is estimated to be at B$5.9 billion.

James Chin, professor of Asian Studies at the Australia-based University of Tasmania, noted how the Russia-Ukraine conflict has boosted global oil prices, bolstering Brunei's oil and gas revenues. But he said this is also the time for Brunei to continue its efforts to wean away from its dependency on oil and gas revenues.

The Centre for Strategic and Policy Studies has forecast Brunei's GDP to grow by 2.6 percent this year, while the current account surplus will remain high at 8.3 percent of GDP in 2023 on the back of oil, gas and chemical product exports.

"Oil and gas revenue is forecast to be still high, with crude oil prices averaging $90 per barrel and LNG prices at $17 per million British thermal units. Government expenditure as a share of GDP is expected to continue to trend lower as fiscal consolidation efforts resume," the CSPS said.

Economic diversification

But oil and gas prices are volatile and it won't spare even a country like Brunei that has a healthy fiscal position. In 2016, Brunei's GDP contracted by 2.6 percent as oil prices fell to record lows.

Nawazish Mirza, professor of finance at Excelia Business School in France, said: "In the short to medium term, rising oil prices are likely to support the Brunei economy."

The Bruneian government has been pursuing economic diversification in the past few years and has managed to get investments outside of the oil and gas industry. One of the biggest investors is China's Zhejiang Hengyi Group, which built a $3.4 billion refinery and petrochemical complex on Muara Besar island.

Turkish oil and fats manufacturing company Marsa Yag Sanayi Ve Ticaret opened a $30 million margarine plant in the northeastern district of Serasa. The state-owned Brunei Fertilizer Industries, which started urea production in 2022, is also expected to bring in more export revenues this year.

Mohd Amin Liew said at the Leg-Co session that Brunei's positive economic growth forecast this year takes into account recovery and economic diversification efforts, according to a report filed by the Brunei-based daily Borneo Bulletin. But Brunei is also facing challenges such as the spread of a new COVID-19 variant, the continued geopolitical situation, high inflation rate, global economic recession and volatile commodity prices.

Mirza at Excelia Business School said reliance on oil and gas "may not be sustainable in the long term due to climate concerns and the global demand is likely to shift to alternative renewable energy sources".

prime@chinadailyapac.com