Brunei economy to return to growth this year: ADB
BANDAR SERI BEGAWAN
THE Brunei economy is projected to return to growth this year but at a rate that will be the lowest among ASEAN economies, the Asian Development Bank (ADB) said yesterday.
In its flagship Asian Development Outlook 2016 report, the ADB forecasts the sultanate’s gross domestic product (GDP) to grow by one per cent in 2016 and climb to 2.5 per cent next year should global oil demand and prices start to recover.
The Manila-based lender said Brunei’s economic growth will also depend on the government’s infrastructure spending.
“Construction will contribute to growth,” ADB said, citing large infrastructure projects such as the Sg Kebun Bridge project to be completed this year and the construction of a bridge to Pulau Muara Besar which is expected to run through 2018.
Construction work has also started on the Temburong bridge which connects Brunei-Muara to the Temburong district. The project will continue through 2019.
ADB said site preparation and dreging is under way for the oil refinery and aromatics cracker in Pulau Muara Besar. Its construction has been delayed but commercial production is scheduled from 2019.
The bank said falling oil and gas prices have impacted government revenue with limited spending on public services and smaller capital projects.
“The financial year 2016 budget cuts total spending by 12.5 per cent from the previous year’s budget. Revenue is projected to fall further and the budget is expected to post another deep deficit in 2016 financial year,” ADB said.
The bank said Brunei has prioritised spending on initiatives that will boost the economy through foreign investment in export-oriented ventures.
New investments include a plant built by Japanese companies to supply pipes and tubing for the petroleum industry and an organic farm proposed by investors from Singapore and Taipei.
In order to attract investments, the Brunei government has reduced the corporate tax rate to 18.5 per cent and introduced a tax credit equal to 50 per cent of salaries paid to new local employees in the first three years of employment.
ADB said Brunei’s Ease of Doing Business ranking for 2016 jumped to 84 from 105 due to reforms on starting a business and paying taxes.
ADB also said the sharp decline in oil prices allowed Brunei to “rein in” subsidies without causing steep increase in local fuel prices.
Based on estimates by the International Energy Agency, Brunei spent almost US$400 million in 2014 ($539.11 million) – equivalent to US$900 per person ($1,213.16) – on fuel subsidies.
“Subsidies on fossil fuels and electricity impose a burden on government budgets and divert funds from more productive investment in physical and social infrastructure,” ADB said in the latest report.
The bank said low energy prices also encourage higher consumption and discourage the development of alternative energy.
The Brunei Times