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Brunei Darussalam Country Risk Report 2017

Core Views

We believe that real GDP growth in Brunei likely bottomed out in2016, and will begin to recover in 2017 as higher oil prices providesupport. However, the process of economic diversification in thecountry will likely remain slow due to poor investor interest andlow levels of private sector participation, and we forecast real GDPgrowth to average just 1.5% over the next five years.

We expect inflation in Brunei to remain near zero over the next10 years due to price controls set by the Department of EconomicPlanning and Development, domestic currency strength and weakdomestic consumption growth. Consumer price inflation will rise onaverage by 0.1% between 2017 and 2026.

Substantial reductions in government revenues will be buffered bythe government's large foreign reserve assets in the years ahead.The budget balance will move from large historical surpluses into apersistent deficit, averaging 9.6% of GDP over the next 10 years.

Brunei's current account surplus is unlikely to grow in 2017 despitehigher oil prices, as we expect imports to increase as well. Weforecast the current account surplus to remain stable and average9-10% of GDP over the next 10 years.

The political environment in Brunei will remain stable over the nextdecade as Sultan Hassanal Bolkiah retains absolute power under thecountry's Malay Islamic Monarchy. Strict shari'a law and the systemof government will continue to affirm the government's strength inthe country over the next 10 years.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Economic Diversification Will Remain A Piecemeal Process
We believe that real GDP growth in Brunei likely bottomed out in 2016, and will begin to recover in 2017 as higher oil prices provide
support. However, the process of economic diversification in the country will likely remain slow due to poor investor interest and low
levels of private sector participation, and we forecast real GDP growth to average just 1.5% over the next five years.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
External Surplus Unlikely To Grow Despite Higher Oil Prices
Brunei's current account surplus is unlikely to grow in 2017 despite higher oil prices, as we expect imports to increase as well. We
forecast the current account surplus to remain stable and average 9.4% of GDP over the next 10 years.
TABLE: TOP FIVE GOODS EXPORTS
TABLE: TOP FIVE GOODS IMPORTS
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Price Control Act To Keep Inflation Low
We expect inflation in Brunei to remain near zero over the next 10 years due to price controls set by the Department of Economic
Planning and Development, domestic currency strength and weak domestic consumption growth. Consumer price inflation will rise on
average by 0.1% between 2017 and 2026.
Fiscal Policy And Public Debt Outlook
Substantial reductions in government revenues will be buffered by the government's large foreign reserve assets in the years ahead.
The budget balance will move from large historical surpluses into a persistent deficit, averaging 9.6% of GDP over the next 10
years.
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Long-Term Economic Outlook
Non-Diversification To Weigh On Growth
The Bruneian economy will experience anaemic growth over the next decade in the wake of the collapse in oil prices. Adding further
pressure to the country's growth prospects is a weak private sector and the undiversified nature of the economy. The oil-rich state will
endure significant deteriorations in fiscal and current account balances by making use of large foreign reserve assets.
Chapter 2: Political Outlook
SWOT Analysis
BMI Political Risk Index
Long-Term Political Outlook
Autocratic Government To Support Sustained Policy Continuity
The political environment in Brunei will remain stable over the next decade, as Sultan Hassanal Bolkiah retains absolute power
under the country's Malay Islamic Monarchy. Strict shari'a law and the autocratic system of government will continue to affirm the
government's strength in the country over the next 10 years.
TABLE: POLITICAL OVERVIEW
Chapter 3: Demographic Outlook
Demographic Outlook
TABLE: POPULATION BY AGE GROUP
TABLE: POPULATION BY AGE GROUP %
TABLE: POPULATION HEADLINE INDICATORS
TABLE: KEY POPULATION RATIOS
TABLE: URBAN/RURAL POPULATION & LIFE EXPECTANCY
Chapter 4: BMI Global Macro Outlook
Emerging Markets Recovery Still In Early Stages
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH (%)
TABLE: EMERGING MARKETS – REAL GDP GROWTH (%)
TABLE: BRUNEI DARUSSALAM – MACROECONOMIC DATA & FORECASTS

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