Published By : 19 Nov 2015 | Published By : QYRESEARCH
Brunei, the ASEAN country that earns nearly 90% of its revenues from hydrocarbon businesses, has narrowly escaped a second economic depression in two years’ duration. However, the recovery is projected to be erratic and slow. The oil-dependent country is clearly struggling owing to the record-low oil prices in the global market for over a year now. Similar to the struggle of many oil-dependent in the unfavorable growth conditions that the current financial condition of the global oil market features, Brunei is also struggling to diversify its economic situation.
The country’s heavy dependence on oil and hydrocarbon revenues had already led Brunei into a state of prolonged recession during 2013 and 2014. This made Brunei the only ASEAN economy to have contracted during that period.
Recovering from the recession this year, the country saw a rise in GDP in the second quarter of this year, but it was not much. Analysts project that the economy of the country will contract by 0.5% in this year after seeing a contraction of 2.3% last year.
The government expects a rise in its fiscal deficit to about 10% of GDP this year, as compared to the 28% surplus it saw not long back, in 2011.
The government is still reluctant to cut on its spending. The contented population of the country has grown used to very generous welfare benefits such as free education, healthcare, and subsidized housing. There are also no sales taxes or personal taxes for the population in the country.
However, the lowered prices of oil on the global front are not the only reason why Brunei’s economy is suffering. The oil production of the country is also dwindling. Unless the country makes new discoveries, analysts predict that its reserves will run out in a course of 24 years.