The global economy is shifting towards a new phase of uncertainty that is caused by the novel coronavirus, and its consequences represented in shrinking demand for crude oil worldwide, which in turn resulted in price slumps that reached their lowest bottoms in decades. In addition, the measure most countries around the world are taking to curb COVID-19 especially lockdowns and border closures have had severe impacts on international trade and manufacturing productivity, putting millions of workers at risk of losing their jobs. The impact of COVID-19 varies depending on each countries readiness and proactivity to respond effectively.
While some countries may be worse hit by these crises than others, the Sultanate of Brunei could be one of those “others.” Brunei is the third-largest oil producer in Asia and the fourth largest exporter of liquefied natural gas. The productions of crude oil and natural gas account for over 50 per cent of the Sultanate’s GDP and almost all its exports. The Sultanate mainly imports most of the essential goods and services since the private sector is largely underdeveloped. It only contributes three per cent to its GDP with most companies are classified as SMEs working in textile, food and furniture sectors.
However, given its relatively small size, strong financial stance and relatively low international commitments, the Sultanate is expected to overcome these challenges. The debt-to-GDP ratio stands at 2.8% which is extremely low compared to other countries in the region and other parts of the world. Furthermore, despite recent global inflationary tendencies, Brunei's prices continue to be highly stable, with an annual average inflation rate of 0.1% in 2019 and it is projected to rise slightly to 0.2% in 2020 and 2021. Citizens pay no taxes and the government guarantees free medical services and education up to the university level and give housing and rice subsidies.
Recently, the Asian Development Bank (ADB) published a report titled The Economic Impact of the COVID-19 Outbreak on Developing Asia. It said that the ongoing COVID-19 outbreak affects the People’s Republic of China and other developing Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects. Given large uncertainties, the ADB gave several scenarios such as best case, moderate case, worse-case and the hypothetical worst-case to assess the impact of COVID-19 on various developing countries in Asia.
Brunei would have its own share of bearing the brunt of either of these scenarios as a country that has strong trade relationships with China and other countries in the region. Nonetheless, it may be better able to come out of this challenge especially knowing that it recorded lesser numbers of coronavirus cases compared to its neighbours. The first confirmed case of COVID-19 in Brunei was detected on 9 Mar 2020 and has since increased to 138 cases with 116 recoveries and one death as of 22 April. The Sultanate’s recovery rate of COVID-19 is over 84%—the highest among the OIC member countries and one of the best rates recorded worldwide.