Brunei’s economy takes a hit from weak hydrocarbon sector
The economy of ASEAN’s smallest member Brunei in 2021 suffered its biggest contraction in five years, dropping 1.6 per cent as oil and gas production woes continued to impede recovery from the Covid-19 pandemic.
In its worst economic recession since the oil price crash in 2016, Brunei recorded declining gross domestic product (GDP) growth in all four quarters of 2021.
Official figures showed that the economy shrank 1.4 per cent in the final quarter of 2021 as pandemic-related restrictions affected some economic sectors, according to a report by local news outlet The Scoop which referred to the country’s Department of Economic Planning and Statistics.
The hydrocarbon sector, on which Brunei is highly reliable on, maintained its poor performance from 2020, dropping 4.8 per cent last year despite rising oil prices globally. Accounting for 50.4 per cent of Brunei’s fourth-quarter GDP, the oil and gas sector had been facing decreasing output and was cited as the main reason for Brunei’s weak economy.
Decreasing oil and gas output
“The reduction in crude oil and natural gas production was due to shutdown turnaround activities,” the department said in a statement.
It added that the decline in liquefied natural gas (LNG) production was due to limited gas supply and maintenance activities at one of the country’s major LNG plants. Manpower shortages and ageing oil and gas fields further contributed to the retraction of oil and gas production in 2021.
Oil output decreased from 105,000 barrels a day in the fourth quarter 2020 to 103,400 barrels a day in the same quarter of 2021. LNG output also tumbled from 901,100 million thermal units per day to 774,100 million thermal units per day in the same period.
Recovery in 2022 likely
However, analysts project the Brunei economy to bounce back from recession in 2022 as higher energy prices are expected to boost growth in the hydrocarbon sector and most Covid-19 control measures have been lifted.
The improved economic outlook was also attributed to the downstream oil and gas sector, which is set to expand with state-owned Brunei Fertiliser Industries having started its ammonia and urea production in the first quarter 2022.
The non-oil and gas sector – which in Brunei’s case includes downstream oil and gas activities – maintained its positive momentum with a growth of 1.4 per cent year-on-year in the last quarter of 2021. The growth was spurred by the services sector, which grew 2.1 per cent as Brunei began easing restrictions on November 19, including allowing dine-ins at restaurants and enabling businesses to operate at half of their usual capacity.
Aviation sector rebounds
Buoyed by the return of more travelers, the air transport sector in Brunei saw the highest growth of 83.6 per cent among all sectors in the last quarter of 2021. Other sectors in positive territory were land transport, other transport services, finance, government services, business services and health.
In contrast, services sub-sectors that struggled with losses included restaurants, wholesale and retail trade, as well as water transport.
Overall, the services sector contributed to 35.4 per cent of Brunei’s GDP in the fourth quarter.
Other growth sectors, albeit small in production volume, are agriculture, forestry and fishery. In the fourth quarter of 2021, these sectors altogether increased 6.1 per cent on the back of rising small-scale and commercial fishing activities, as well as a jump in sawn timber production.
The economy of ASEAN’s smallest member Brunei in 2021 suffered its biggest contraction in five years, dropping 1.6 per cent as oil and gas production woes continued to impede recovery from the Covid-19 pandemic. In its worst economic recession since the oil price crash in 2016, Brunei recorded declining gross domestic product (GDP) growth in all four quarters of 2021. Official figures showed that the economy shrank 1.4 per cent in the final quarter of 2021 as pandemic-related restrictions affected some economic sectors, according to a report by local news outlet The Scoop which referred to the country’s Department of...
The economy of ASEAN’s smallest member Brunei in 2021 suffered its biggest contraction in five years, dropping 1.6 per cent as oil and gas production woes continued to impede recovery from the Covid-19 pandemic.
In its worst economic recession since the oil price crash in 2016, Brunei recorded declining gross domestic product (GDP) growth in all four quarters of 2021.
Official figures showed that the economy shrank 1.4 per cent in the final quarter of 2021 as pandemic-related restrictions affected some economic sectors, according to a report by local news outlet The Scoop which referred to the country’s Department of Economic Planning and Statistics.
The hydrocarbon sector, on which Brunei is highly reliable on, maintained its poor performance from 2020, dropping 4.8 per cent last year despite rising oil prices globally. Accounting for 50.4 per cent of Brunei’s fourth-quarter GDP, the oil and gas sector had been facing decreasing output and was cited as the main reason for Brunei’s weak economy.
Decreasing oil and gas output
“The reduction in crude oil and natural gas production was due to shutdown turnaround activities,” the department said in a statement.
It added that the decline in liquefied natural gas (LNG) production was due to limited gas supply and maintenance activities at one of the country’s major LNG plants. Manpower shortages and ageing oil and gas fields further contributed to the retraction of oil and gas production in 2021.
Oil output decreased from 105,000 barrels a day in the fourth quarter 2020 to 103,400 barrels a day in the same quarter of 2021. LNG output also tumbled from 901,100 million thermal units per day to 774,100 million thermal units per day in the same period.
Recovery in 2022 likely
However, analysts project the Brunei economy to bounce back from recession in 2022 as higher energy prices are expected to boost growth in the hydrocarbon sector and most Covid-19 control measures have been lifted.
The improved economic outlook was also attributed to the downstream oil and gas sector, which is set to expand with state-owned Brunei Fertiliser Industries having started its ammonia and urea production in the first quarter 2022.
The non-oil and gas sector – which in Brunei’s case includes downstream oil and gas activities – maintained its positive momentum with a growth of 1.4 per cent year-on-year in the last quarter of 2021. The growth was spurred by the services sector, which grew 2.1 per cent as Brunei began easing restrictions on November 19, including allowing dine-ins at restaurants and enabling businesses to operate at half of their usual capacity.
Aviation sector rebounds
Buoyed by the return of more travelers, the air transport sector in Brunei saw the highest growth of 83.6 per cent among all sectors in the last quarter of 2021. Other sectors in positive territory were land transport, other transport services, finance, government services, business services and health.
In contrast, services sub-sectors that struggled with losses included restaurants, wholesale and retail trade, as well as water transport.
Overall, the services sector contributed to 35.4 per cent of Brunei’s GDP in the fourth quarter.
Other growth sectors, albeit small in production volume, are agriculture, forestry and fishery. In the fourth quarter of 2021, these sectors altogether increased 6.1 per cent on the back of rising small-scale and commercial fishing activities, as well as a jump in sawn timber production.
