Brunei Public Finance 2007
The Economic Planning and Development Department or better known as JPKE (Jabatan Perancangan dan Kemajuan Ekonomi) published the latest Brunei Economic Bulletin. For those who don't know this, this is THE government publication if you want to know about our country's economic review, outlook and recent economic developments. This issue covers all of 2007. You can go to JPKE website and download it or you can go to my main website to download the full pdf version of the bulletin.In the report it is highlighted that our economic growth rate for 2007 is 0.6% which has slowed down significantly compared to 2006 when it was 4.4%. Our GDP was $18.5 billion last year. We have a trade surplus of $8.4 billion with oil and gas making up 96.2% of our total exports and 60% of these going to Japan and Indonesia. Last year the inflation rate was a very low 0.3%. Economic outlook for 2008 looks to be good given the progress of RKN projects and SPARK (Sungai Liang Industiral Park) and the economy is expected to grow at around 1%. But there will be an upward pressure on prices due to global inflation.
What interested me more in the report is the public finance or the money side of it. I published the data from treasury which I took from the report up there. For 2007, the government earned $8.8 billion and spent $5.8 billion compared to 2006 of earning $9.6 billion and spending only $5.2 billion. So 2007's surplus was only around $3 billion as compared to about $3.7 billion in 2006. The figures show how much income we earned from oil and gas. For expenditure, government's wages still show the largest expenditure of around $1.8 billion. Development expenditure under RKN only around $0.6 billion even though more than a billion was allocated. The government has an undercapacity to spend all its RKN allocation. Anyway, do read the whole report so that we all can talk the same language.
Comments
After a quick read, I have a couple of points to make:
1. At least 5 out of 8 sectors contracted. Now, I don’t know if anyone else shares my concern, but when I see 60 % of the economy is not doing well, I’m quite worried. We really need to boost our development spending lah!
2. I am also surprised that the government revenue from the oil and gas sector actually fell in 2007 despite the continued increase in oil price. I am expecting a reverse in this year’s figure.
3. It is interesting that our inflation rate is quite modest, though I’m not sure we can expect a repeated occurrence this year.
4. Now this surprises me the most: Under the OUTLOOK section and I quote “oil production is expected to remain subdued due to….weaker global demand for oil…” Are we talking about Oil demand?
5. Now, try to imagine looking at the same tables, after 25 years when there’s no more oil in the ground. Oh dear. It gives me a tummy ache.
Thanks for posting this up.
Crude oil output fell 13.1% and LNG output fell by 3.7% (p.3 of BEE). The decrease in output was enough to offset 13.8% increase in AWCOPI prices (p.14 of BEE) resulting in an overall 6.9% decline in oil and gas sector even when energy prices was at historic high!
So what will happen in 2008 when (so far) energy prices have been going through the roof? P.16 of BEE offers, "....lower oil production in 2008 is expected to offset growth in the non-energy sector."
Enough to feel sad?
It must be understood though, that oil and gas production is far from an exact science. There are any number of factors to consider: how the reservior behaves, shutdowns (scheduled or not), infrastructure bottlenecks, poor exploration results, accidents, lack of investment, delays in capital programs etc. And one should be careful not to make judgments in hindsight.
I could be mistaken, but having sector that accounts for 66% of the GDP and 96.2% of exports to register a negative 6.9% during a record-breaking year worldwide just seems a bit odd.