Brunei GDP At 3.0pc In 2007
By Azlan Othman

Bandar Seri Begawan - With the global energy demand easing, Brunei's gross domestic product (GDP) is forecast to slow to 3.0 per cent in 2007, said a report released recently by the Asian Development Bank (ADB).

The report covers the 10 Asean countries, China, Hong Kong, Japan, South Korea and Taiwan. ADB said the Brunei economy is expected to grow at 3.7 per cent this year as energy prices are higher and thus strong earnings from oil and gas exports.

ADB felt that although petroleum products still account for more than half of the economy, banking, insurance, transportation and the food-retailing sector have increased their contribution to GDP growth in recent years and will likely assume a larger share of economic output in the years ahead. Price trends suggest that for 2006-07, inflation will remain low at about 0.5 per cent.

This is in line with Brunei's Department of Economic Planning and Development (JPKE) recent Economic' Bulletin report which stated that in the financial services sector, 2005 saw a healthy expansion of 9.9 per cent compared to 5.2 per cent in 2004. The value added in nominal terms picked up from $375.4 million in 2004 to $472.3 million in 2005. The growth in this sector was driven more by activities in the insurance sub sector.

The Economic Bulletin also reported that transport and communication sector contributed positively to 2005 growth. It expanded by 4.1 per cent in 2005 after experiencing a 3.6 per cent contraction in 2004.

The wholesale and retail trade expanded at a lower pace of 2.2 per cent in 2005 compared to 3.1 per cent in 2004. In nominal terms, the value added in this sector grew by 3.2 per cent to $457.8 million in 2005 compared to $443.6 million in 2004.

The ADB report added major external risk is the possibility of an export slowdown, as growth in industrialised nations softens. A key internal, long term risk is the slower than announced pace of the government's economic diversification programme, affected by limited availability of human resources, particularly in the financial sector, which could diminish investor confidence.

ADB also said the currency board system, anchored on the Singapore dollar, precludes an independent monetary policy. On fiscal policy, with 90 per cent of revenues coming from oil and gas, sustainability is a medium term concern. The government needs to keep an eye on its growing expenditures following the salary increase for civil servants and recently announced increases for 2007 in health and education expenditures.

In the report, ADB also said the Brunei government continues its attempts to diversify the economy, with an emphasis on developing the Islamic banking sector. As part of its diversification programme, and to support the development of Islamic financing, the Syariah Financial Supervisory Board was established in January 2006 to regulate Islamic finance. The government floated its first Islamic bond this year and established the Brunei International Financial Centre. However, considerable strengthening of the financial and regulatory framework and increased availability of qualified human resources are essential to the success of these initiatives.

The ADB also said in 2006, the government created the SME Innovation Centre, which focuses on supporting projects to facilitate information and communication technology in e-business and e-government.

East Asia's rapid economic growth in GDP is expected to soften in 2007 to a still robust 4.4 per cent from 4.9 per cent this year, said ADB. The report forecast China's economy to make a relatively smooth transition from projected 10.4 per cent in 2006 to 9.5 per cent next year while for Japan, growth is likely to be 2.8 per cent in 2006 and is expected to slow modestly to 2.4 per cent in 2007.

The ADB said an expected slowdown in growth in the US and euro area will only reduce demand for East Asia exports slightly. Coupled with resilient domestic consumption, this will sustain economic expansion across the region.

According to ADB, there are six major risks to the regional growth outlook: a sharper than expected slowdown in the US economy, a disorderly adjustment of global payment imbalances, global financial market turbulence, a sudden oil supply shock, an insufficient slowdown of the Chinese economy and disruptions from non-economic events like avian flu pandemic or rising geopolitical tension on the Korean peninsula.

Among Asean countries, Vietnam is expected to perform better with 7.6 per cent GDP growth, followed by Laos - (6.5%), Cambodia (6.4%), Indonesia (6.0%), the Philippines (5.3%), Malaysia (5.3%) and Thailand (4,5%).-- Courtesy of Borneo Bulletin

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