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Azlan Othman The Sultanate’s gross domestic product (GDP) growth is forecast to be 2.8 per cent this year (2023) and 2.6 per cent next year and the nation’s economic growth will be driven mainly by domestic consumption and revival of investment spending. This was reported by the ASEAN+3 Macroeconomic Research Office (AMRO) in its annual flagship report, the ASEAN+3 Regional Economic Outlook (AREO) 2023 on Thursday. The report stated that continuing reliance on the oil and gas sector makes the nation vulnerable to domestic and external shocks, which could derail the growth prospects and put strains on the external and fiscal positions. Possible re-emergence of new and more virulent COVID-19 variants could set back the economic recovery for the Sultanate. Sharply higher borrowing costs could exert downward pressure on corporate earnings, at a time when external demand is moderating. Perennial risks, such as those posed by climate change, could also undermine Brunei’s macro-financial stability in the longer term, the report said. The resumption of economic activities amid fuller economic re-opening has benefitted the non-oil and gas sector. Particularly, with the return of travel, transport services have notably improved. ![](https://media.everythingbrunei.com/public/REpmZiWa3FGYgmDf_cjFh-0QHS-KfQf9usRlbwO9GBw.jpeg) A nodding donkey in the Belait District. PHOTO: KRITTIKA YADAV The diversion of domestic oil and gas supplies to the downstream industry has also provided the impetus to the non-oil and gas sector growth. However, the oil and gas sector continues to face production challenges, reflecting ongoing efforts to rejuvenate offshore oil and gas fields and the compound effect of disruptions during COVID-19 restrictions. Real GDP grew by 0.9 per cent in Q3 2022 – the first quarterly expansion since Q3 2020, driven by the robust activities in the non-oil and gas sector. The oil and gas sector also improved during the period, with the decline in oil and gas production bottoming out. Despite positive out turns, real GDP contracted by 2.6 per cent in the first three quarters of 2022, reflecting the unexpectedly large contraction in the oil and gas sector in the first half of 2022 (-9.4 per cent year-on-year). For 2022, the economy is estimated to have contracted by 1.2 per cent from -1.6 per cent in 2021, benefitting from fuller economic re-opening. AMRO forecast the nation’s GDP growth to be at 2.8 per cent this year, while for 2024 is 2.6 per cent. Inflation has risen to multi-year highs, driven mainly by global commodity price shocks. As the country is a net food importer, elevated global food prices, especially in the first half of 2022, contributed significantly to the broadening of food inflation. Meanwhile, the spike in prices of transport services and vehicles has also induced higher transport inflation. Miscellaneous goods and services inflation, chiefly in the form of higher vehicle insurance premiums influenced by market prices of cars, added to overall price pressures. As a result, inflation remained high at 3.7 per cent in 2022, increasing from 1.7 per cent in 2021.

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