Growth at 2.3%, deficit at $1.02b

THE Brunei economy is projected to grow at the rate of 0.7 per cent to 2.3 per cent this year, but low oil prices and decreasing oil production levels could result in the Sultanate facing a deficit of over $1.02 billion, said the Second Minister of Finance yesterday.

Citing figures from the Department of Economic Planning and Development at the Prime Minister's Office, Pehin Orang Kaya Laila Setia Dato Seri Setia Hj Abdul Rahman Hj Ibrahim said that the projection is similar to Asian Development Bank's forecast which stated that Brunei's economy is set to grow more than two per cent in 2010.

The projected growth, announced yesterday at the State Legislative Council meeting yesterday, is made with the assumption that demand and oil prices would increase, and that National Development Plan projects are implemented and that methanol production starts.

However, taking into account the estimated revenues that will be collected compared to the estimated government expenditure, Brunei's financial position in 2010/2011 is anticipated to experience a deficit of as much as $1.02 billion, the minister said.

Pehin Dato Hj Abdul Rahman said the deficit would be due to several factors, including low oil prices and the decrease in Brunei's oil production which has affected government revenues.

In addition, the country also needs to handle global issues such as the Influenza A H1N1 pandemic, avian flu and effects of global warming, he said.

"The risk on development and direction of the global economy is relevant to Brunei due to its impact on the global demand (market) of oil and gas. In 2009, global oil prices decreased compared to previous years and had since remained volatile," Pehin Dato Hj Abdul Rahman said.

The International Energy Agency expects the global oil demand to increase by 1.4 million barrels a day to 86.3 million barrels this year, while the supply is expected to increase from 2.1 million barrels per day to 93 million barrels.

"With the high supply of oil in the market compared to demand, it will certainly exert greater pressure to reduce global oil prices, he said.

The impact will directly affect the oil and gas sector revenues, even though various initiatives have been implemented to diversify Brunei's economy, he said. Oil and gas sector contributes 90 per cent of the government's total revenue, and 95 per cent of the country's exports.

"Based on these projections and the current direction of the world economy, and considering the level of Brunei oil production and the US dollar currency exchange, the projected government revenue for the financial year 2010/2011 is $4.630 billion," he said, compared to $4 billion in 2009/2010.

The projected government revenues also take into account the anticipated increase of revenues in government services, collection of taxes and charges, with $789.5 million compared to $766 million projected in the fiscal year 2009/2010.

Pehin Dato Hj Abdul Rahman reminded that even though there were positive developments in the global economy and government revenues, government agencies should practise prudent and systematic budgeting.

"This is to ensure that the expenditure objectives will be achieved and are cost-effective, as well as focus towards creating value for money," he said, adding that priorities should be given to expenditures that are aligned with the prescribed budget focus, especially efforts on expanding the country's economic activities.

With uncertain oil and gas revenues, agencies responsible in collecting government revenues have to strengthen their respective administration and revenue collection management, he said, adding that government revenues should be collected on time, and not lead to the accumulation of outstanding expenses.

In this regard, Pehin Dato Hj Abdul Rahman called for public cooperation to pay their outstanding bills and payments to the government. "The collected revenue, insyaAllah will be used to finance development projects and programmes specifically to increase the welfare and standard of living of the citizen and residents," he said.

The Brunei Times