Increase in Brunei business activity in July

The Central Bank of Brunei Darussalam (BDCB) yesterday released the Sultanate Business Climate Index (BSI) for July 2022.

The index is based on surveys of more than 600 micro, small, medium and large enterprises in the country’s 11 economic sectors.

The monthly index is designed to measure the level of business confidence/sentiment in the country and cover various aspects including current and future business conditions; investments; employment of workers; as well as business operating costs. Therefore, the BSI serves as a leading macroeconomic indicator with its forward-looking element.

The BSI and sub indices can be interpreted as follows: above 50 – expansion/optimism compared to the previous month; 50 – similar/no change from previous month; and lower

50 – contraction/less optimism compared to the previous month.

Within the BSI, there are nine sub-indices within the BSI. The current economic conditions sub-index, which is the main overall index of the BSI, was 50.4 in July 2022. This indicates that businesses were generally optimistic about expectations of increased business activity and sales in July 2022. Several sectors are expected to benefit from the demand of the Haj and Hari Raya Aidiladha season, and the events and festivities associated with His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaulah ibni Al-Marhum Sultan Haji Omar ‘Ali Saifuddien Sa’adul Khairi Waddien, Sultan and Yang Di-Pertuan of Brunei Darussalam 76th Anniversary Celebration. The oil and gas related sector should benefit from higher oil prices and increased production volumes. Some companies, on the other hand, expected a slowdown in business activity due to the resurgence of COVID-19 cases, lower consumer spending and several holidays during the month.

As for August 2022, companies were generally bullish as indicated by the one-month (1M) ahead index, which came in at 50.3. This was driven by expectations of increased sales and more projects, as well as a general improvement in business operations with more overseas workers and inbound inventory shipments. With land borders reopening from August 2022, some companies have shared their concerns. that this could reduce sales as more people would travel while some expressed that it could benefit them, with the revival of demand for goods and services from foreign customers.

The investment sub-index was 50.5 for the current month, 50.0 for one month (1M) ahead and 50.3 for three months (3M) ahead. This indicates that in general, companies planned to increase their capital expenditure in July 2022 with the purchase of new equipment and machinery, the expansion of premises; and stock building. While the level of capital expenditure is expected to remain the same in August 2022, companies expected it to recover within three months.

Meanwhile, the employment sub-index was 50.2 for the current month and 50.2 for the 1 million ahead, with companies generally expecting to hire more employees in July 2022 in anticipation of increased projects and business activities, as well as to replace workers who have left their company. . Companies also expected to continue hiring workers in August 2022 to address the ongoing labor shortage issue which was caused in part by delays in recruiting foreign workers and also by difficulties to hire local employees.

The cost sub-index was 50.3 for the current month and 50.1 for 1M ahead, indicating an expected increase in business operating costs in July and the following month. Reasons cited include higher raw material costs; increased logistics and transportation costs; more expenses needed for maintenance, training, overtime pay, payroll for new hires; and airline tickets for outgoing foreign employees.

In terms of economic sectors, six out of 11 sectors recorded optimism in July 2022.

The transport and communications, as well as finance and insurance sectors posted the biggest increases in sentiment as better performance is expected with further easing measures.

The oil and gas sector also expected improved performance and earnings, supported by higher production and high oil prices. On the other hand, the other private services sectors showed pessimism in July 2022, as a drop in productivity is expected due to the shortage of workers. Meanwhile, the manufacturing, construction, real estate and home ownership, and healthcare and education sectors reported similar sentiments regarding their business conditions in July 2022 compared to to June 2022.

Regarding the index by company size, only large companies reported optimism in July 2022 on expectations of increased sales and profits due to increased production and business activities in general.

Meanwhile, micro, small and medium enterprises expected similar trading conditions as the previous month.

For more information on the BSI, the public can refer to the Technical Notes on Methodology and Statistics on the CBDB’s website at www.bdcb.gov.bn and follow updates on the BSI through future press releases and the CBDB Instagram account @centralbank.brunei.

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