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Brunei’s economy contracts 1.4% for second consecutive quarter

By on July 21, 2021 0

BANDAR SERI BEGAWAN – Income losses in the oil and gas industry continued to hurt Brunei’s economy in the first quarter of 2021, with gross domestic product (GDP) contracting 1.4% year-on-year.

The poor performance of the energy sector has undermined economic growth for two consecutive quarters, with GDP also falling 1.4% in the last quarter of last year.

Data from the Department of Economic Planning and Statistics (DEPS) showed that the energy sector continued its downward trend of 5.3% in the first quarter of 2021, after showing negative growth in the four quarters of 2020.

In its first-quarter 2021 GDP report released last weekend, DEPS said lower oil and gas production led to lower profits.

The liquefied natural gas sub-sector recorded an 11.4% drop in production year-on-year.

Crude oil production fell 1.2%, from 116,300 barrels per day in the first quarter of 2020 to 114,900 barrels per day in the first quarter of this year.

Natural gas production was also reduced to 32.6 million cubic meters per day in the first quarter of 2021, from 34.8 million cubic meters per day the previous year.

Source: Department of Economic Planning and Statistics

DEPS attributed the reduction in crude oil and natural gas production to an “unscheduled shutdown” of an offshore platform.

On Sunday, the main oil producers of the OPEC Plus group agreed to increase production after U.S. oil prices briefly hit a six-year high on July 6 due to a dispute between Saudi Arabia and the United States. United Arab Emirates on increasing supply.

Brent crude – the global benchmark for oil prices – fell 6.8% to $ 68.62 a barrel, a day after OPEC Plus countries reached a compromise to increase production from August.

The Center for Strategic and Policy Studies has previously said commodity prices are not expected to return to pre-pandemic levels this year.

The increase in coronavirus cases around the world driven by the Delta variant has further clouded the outlook for oil and gas demand as countries around the world return to lockdowns.

Source: Department of Economic Planning and Statistics

The downstream sector remains in positive territory

Fueled by Hengyi Industries’ petrochemical exports, the downstream sub-sector maintained its good performance with growth of 3.1% in the first quarter of 2021.

Downstream activities were the main driver of Brunei’s economic growth last year, with petrochemical manufacturing soaring 323.9%.

Hengyi Industries has exported 9.46 million metric tons of petrochemicals valued at $ 4.08 billion since its the oil refinery started operations in November 2019.

The construction sector faces a serious crisis

In the first quarter, the industrial sector recorded a 3.1% drop in revenues, in part due to a 16.6% drop in the construction sub-sector.

The construction sector recorded a 3.2 percent annual growth last year, despite supply chain disruptions due to the COVID-19 pandemic.

Travel restrictions have also affected the hiring of migrant workers in the construction industry. Currently, the government only issues permits to foreign workers who are considered essential workers.

Migrant workers constituted 78 percent of the total workforce in the construction sector, according to the 2019 DEPS Employment Survey.

The positives of the industrial sector included a 30.7 percent increase in food and beverage manufacturing and a 22.6 percent increase in clothing and textiles production.

Source: Department of Economic Planning and Statistics

The service sector returns to growth

The service sector returned to growth for the first time since 2019, registering an increase of 2.2% in the first quarter.

With limited business activity due to restrictions related to COVID-19, the service sector recorded a 1.9% contraction last year.

Business services posted the strongest growth at 17.9% in the first quarter, followed by wholesale and retail trade at 9.6% and health services at 8.6%.

However, the air transport sub-sector continued to experience a sharp drop of 87.6 percent with no signs of recovery this year, with Brunei’s borders remaining closed to non-essential travel.

Exports of goods and services also fell 4.3%, while imports climbed 21.5% year-on-year.