Economic growth to be slow

National 2 minutes, 50 seconds

BANDAR SERI BEGAWAN

SLOW economic growth is expected to continue in Brunei after the oil and gas sector is projected to fall about four per cent this year, due to increasing costs in oil and gas production and a reduction in oil production from maturing oil fields, the Second Minister of Finance said yesterday.

Last year, Brunei was estimated to experience slow growth at a rate of less than one per cent due to the decreasing growth of the oil and gas sector, even though the non oil gas sector recorded a healthy growth of 5.1 per cent, said Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman Hj Ibrahim at the second day of the fourth State Legislative Council meeting.

"In line with the government's efforts to focus on strengthening and diversifying the country's economy, the non-oil and gas sector is estimated to grow at a rate of to 4.5 per cent in 2008," he said.

He explained that this increase is due to growth in the industry sectors, finance and banking, wholesale and retail, transportation and communications, as well as business services.

"However, because the country's economy is still dependent on activities from the oil and gas sector and absolute contribution from the non oil and gas sector to GDP is still low, economic growth will show a decrease of around one per cent, as projected by the International Monetary Fund," he said.

Pehin Dato Hj Abdul Rahman added that Brunei's economy is projected to grow at more than three per cent in the mid-term, when oil production returns to current levels and government development projects in the National Development Plan 2007-2012 are realised.

The minister said that the economic fundamentals of the country continue to be in a stable situation, whereby inflation stood at a low level of less than 1 per cent last year, compared to the average of 4 per cent for other countries in the region.

Futhermore, Brunei is experiencing continuing surplus in its current account balance and fiscal account.

"This is the result of prudent government spending," he said, adding that this is a reminder of how important that all parties need to continue and double their efforts to accelerate the growth and expansion of the country's economic resources.

A total of 75 per cent of the total budget allocation was spent in the fiscal year of 2006/2007, compared to 54 per cent in the previous financial year.

He said that the objective of the country's expenditure for 2008/2009 is still in the direction of fiscal consolidation, but this will be carried out carefully so as to not affect efforts to develop the country.

Budget planning for this fiscal year was based on three main factors, including government expenditure which is increasing from year to year, and inflexible government expenditure for staff salary.

The rate of government expenditure is considered high compared to other countries in the region, the minister added.

"Majority of the government expenditure is not flexible, for the categories of staff salary and recurring expenditure."

"At the level of government agencies, the increase in expenditure should be coupled with the increase in efficiency in productivity and quality of services," he added.

He pointed out that if the proper control and decrease of unflexible expenditure can be carried out, this will provide room for a budget increase in paying for development projects.

The Brunei Times