Brunei: Country Economic Forecast: 13 Oct 2011

Last year's GDP growth was slightly faster than forecast at about 2.6%, though this was partly because revisions showed a deeper 1.8% decline in 2009. External slowdown, especially in main market Japan, will mean slower growth of just under 2% this year, but there is scope for acceleration in 2012-13 as a recovering world economy lifts oil prices, and large projects start to come onstream. Inflation ended 2010 at 0.9%, subdued with the help of a fiscal surplus estimated at over 10% of GDP. But food prices boosted inflation to 1.6% in Q1 this year and service prices will keep it above trend despite a fall in average utility bills. Unemployment, officially 3.7%, remains a problem as many jobs outside the oil and public sectors are lower-paid and go to foreign temporary workers. New offshore oil and gas drilling plans worth up to US$1bn in 2011-13 have been announced, with foreign partners (including Shell and Mitsubishi) planning US$10bn of follow-up development, including a possible liquefaction plant in Brunei. Petronas, the project's major shareholder, also plans a new US$1.6bn petrochemical plant and engineering facility in the PMB zone. The share of oil and gas in GDP fell from over 70% in 2008 to around 60% in 2009-10, but the shift was mainly into government services (13% of GDP), with lower growth of the business and financial services share (to around 8%). The gas share is set to grow again due to growth of processing capacity and arrival of new supplies and customers, with India becoming a major market.