Course Code:

ECO211

Course Name:
Macroeconomics

Topic:
ANALYSING CURRENT MACROECONOMIC PROBLEM IN BRUNEI

Prepared by:

Name Student No. Group/Class

MUHAMMAD AIMAN ZULFADZLI BIN NOOR AZAMI 2022811948 TAC1104B
AHMAD AMIRUL HAKIM BIN MOHD AFIFI 2022837666 TAC1104B
MUHAMMAD ADIB BIN MAZLAN 2022873254 TAC1104B
SYED FAKHRUL ARIFIN BIN SYED SAHIBUL BAHRI 2022877062 TAC1104B
MUHAMMAD SYAMIEL BIN MOHD SHARIF 2022850018 TAC1104B
Table of Contents
1.0 INTRODUCTION........................................................................................................................3
2.0 ANALYZING CURRENT MACROECONOMICS PROBLEM IN BRUNEI.................................................4
2.1 ISSUE INFLATION IN BRUNEI.......................................................................................................4
2.2 ISSUE UNEMPLOYMENT IN BRUNEI............................................................................................5
3.0 APPROPRIATE MEASURES TO OVERCOME MACROECONOMICS PROBLEM IN BRUNEI.................6
3.1 MEASURE TO OVERCOME INFLATION IN BRUNEI USING MONETARY AND FISCAL POLICIES.....6
3.1.1Monetary Policy....................................................................................................................7
3.1.2 Fiscal Policy..........................................................................................................................7
3.2 MEASURE TO OVERCOME UNEMPLOYMENT IN BRUNEI USING MONETARY AND FISCAL
POLICIES............................................................................................................................................8
3.2.1 Monetary Policy...................................................................................................................8
3.2.2 Fiscal Policy..........................................................................................................................8
4.0 CONCLUSION.................................................................................................................................10
5.0 REFERENCES..................................................................................................................................11
1.0 INTRODUCTION

Brunei Darussalam is well known country because of its richness in terms of economic
because of having access to rich oil and petroleum. Brunei is in coastline on the South China Sea that
is surrounded by Malaysian State in Sarawak. Brunei is also located on the north part of Sarawak,
Malaysia which are rich with natural gas, petroleum and timber that help them increase their Gross
Domestic Product. The capital of Brunei Darussalam is Bandar Seri Begawan it was named after
Sultan’s late father, Omar Ali Saifuddien.

The total population of Brunei in 2023 was 450,500 persons and the total population in 2018
was 436,600 persons. Only 52.76% population in this country are male and 47.24% are female in the
year of 2023. This country main religion is an Islam which covered up 80.9%, 7.1% Christianity,7%
Buddhism and 5% are other religion.

2018 2019 2020 2021 2022 2023

TOTAL POPULATION 436,600 451,000 441,800 440,715 445,400 450,500
MALE 232,100 241,600 236,000 232,194 235,000 237,700
FEMALE 204,500 209,400 205,800 208,521 210,400 212,800

The data that was found for Gross Domestic Product, Gross National Income and Gross
National Savings was between in 2019 – 2023. The latest GDP was BND 20318.5 million and the
highest GDP was in 2022 which was BND 23003.1 million. The latest GNI was BND 20579.1 million
and the highest GNI was in 2022 which was BND 22493.4 million. For GNS, the latest was BND 9338.8
million and the highest out of all was in 2022 which was BND 11589.4 million. In the ranking
between countries in term of GDP, Brunei is ranked at 135, this is because it is having small
population since Brunei have two separated small land even though it is rich with oil and petroleum.
Oil and petroleum are their main sector contribution to GDP which remains until today. They also
have sub sector such as fishing and agriculture, but they have a very small contribution towards GDP
in Brunei.
 2019 2020 2021 2022 2023
Value At Current Prices (BND million)
Gross Domestic Product 18,375.0 16,564.4 18,822.0 23,003 20,318.5
Gross National Income 18,867.6 17,063.6 18,942.5 22,493.4 20,579.1
Gross National Savings 9,836.5 8,428.9 9,361.3 11,589.4 9,338.8

2.0 ANALYZING CURRENT MACROECONOMICS

PROBLEM IN BRUNEI
2.1 ISSUE INFLATION IN BRUNEI

1.4 Graph of Inflation rate in Brunei from 2014 to 2023

A persistent rise in the average price of goods and services over time in an economy
known as inflation. It is a crucial macroeconomic component that can have a big impact on
stability and economic progress. Demand-pull inflation, which is fueled by rises in overall
demand, and cost-push inflation, which is brought on by increases in production costs, are
the two primary forms of inflation. Numerous theoretical and empirical studies have been
conducted on the complex relationship between inflation and economic growth.

According to data from the Macrotrends Graph, the inflation rate in Brunei as
measured by the customer price index (CPI), has increase fluctuant from 2014 to 2024.In
2014, the annual inflation rate was –0.21%. followed by a decline to –0.60%.the inflation rate
remained low for the next couple of years, reaching lowest in 2017 to –1.26%. However, in
2022, it has increase sharply by 3.68%.

Main reasons contributed to the increase in inflation in 2022, included the rising cost
of imported goods it is because Brunei heavily relies on imports for many goods and
commodities, if the cost of these imports increase due to global inflation or currency
fluctuations, it can contribute to higher overall inflation in the country.

In summary, Brunei inflation current rate not that actually high. But if the inflation rate
was too low it may cause slow economic growth and depress wages. In the past several
years there is deflation in this country main reasons for this problem are declines in crude oil
production and tourism.

2.2 ISSUE UNEMPLOYMENT IN BRUNEI

1.5 Graph of Unemployment Rate in Brunei from 2018 (start of data collection) to 2023

A nation's unemployment rate is frequently cited as a gauge for economic health. When
someone is capable and motivated to work but cannot find a job that pays, they become
unemployed. The percentage of the workforce that is unemployed is known as the
unemployment rate. Therefore, determining the labor force participation rate requires
knowing who is employed. A nation is deemed to have achieved full employment when its
unemployment rate falls below 4%.
Between 2018 and 2022, Brunei experienced significant fluctuations in its unemployment
rate, reflecting both internal economic adjustments and external global influences. In 2018,
the unemployment rate stood at 6.60%, marking a modest decline from the previous year.
This decrease likely stemmed from ongoing efforts to diversify Brunei's economy beyond its
traditional dependence on oil and gas, which provided new job opportunities across various
sectors.

However, by 2019, the unemployment rate saw a slight increase to 7.41%, which could be
attributed to global economic uncertainties and adjustments within the local labor market.
Despite this uptick, 2020 saw a remarkable decline to 4.91%, indicating effective economic
policies and initiatives aimed at stimulating job creation and enhancing employment
opportunities amidst the challenges posed by the COVID-19 pandemic.

In 2021, Brunei's unemployment rate continued its downward trajectory, reaching 4.45%.
This 0.46% decline from 2020 reflects resilient economic strategies and proactive measures
implemented by the government to support businesses, protect jobs, and stabilize the
economy during the pandemic. Such measures likely included fiscal stimulus packages,
support for affected industries, and initiatives to promote workforce training and
development.

Overall, Brunei's ability to manage its unemployment rate amidst global economic
uncertainties underscores its commitment to sustainable economic growth and
diversification. By leveraging its oil wealth to invest in other sectors and prioritize human
capital development, Brunei aims to maintain a stable and resilient economy with ample
employment opportunities for its citizens

3.0 APPROPRIATE MEASURES TO OVERCOME

MACROECONOMICS PROBLEM IN BRUNEI
3.1 MEASURE TO OVERCOME INFLATION IN BRUNEI USING
MONETARY AND FISCAL POLICIES
If an excessive aggregate demand is the root cause of inflation, contractionary
monetary policy and contractionary fiscal policy can be utilized to reduce the
aggregate demand.
3.1.1Monetary Policy
Monetary Policy is a critical tool used by central banks to manage inflation. In Brunei, they approach
to monetary policy and inflation management is unique due to its currency arrangements and
economic structure.

a) Increase The Policy Interest Rate

They can raise the benchmark interest rate (like the overnight policy rate) to make
borrowing more expensive. The benchmark interest rate in Brunei was last recorded at 5.50
percent. Interest rate in Brunei averaged 5.50 percent from 2003 until 2024,reaching an all-
time high of 5.50 percent in January of 2004.This discourages consumer spending and
investment, reducing aggregate demand and controlling inflation pressures.
b) Open Market Operations (OMOs)
Autoriti Monetari Brunei Darussalam (AMBD) can conduct OMOs to manage liquidity in the
banking system. When AMBD buys government securities, it injects liquidity into the banking
system, increasing the money supply. This action is usually taken to lower short term
interest’s rates. Selling government securities absorbs excess liquidity, can help in reducing
inflation pressures by lowering the money supply.
c)Reserve Requirements
Adjusting the reserve requirements affect the lending capacity of commercial banks. The
specific reserve ratio is set by the AMBD and very depending on the type of deposit such as
demand deposits and time deposits. This ratio determines the percentage of total deposits
that must be kept as reserves.

3.1.2 Fiscal Policy

Brunei fiscal policy focuses on leveraging its substantial oil and gas revenues to support
economic development, social welfare and infrastructure projects.
a) Surplus Budget
Plan for a surplus budget involves a mix of fiscal discipline, diversification of its economy
and prudent management of its natural resources, primarily oil and gas. Oil and Gas Sector,
maximizing revenue from its primary sources of income oil and gas with efficient
management and strategic partnerships. Next, the diversification is reducing reliance on
hydrocarbons by investing in other sectors like finance and technology.
b) Control Inflation to Reduce Spending
The government and monetary authorities can consider the strategies, the government cut
down on public sector spending, which can help lower overall demand in the economy. The
government increase taxes, they raise taxes to reduce disposable income and limit
consumer spending. Higher taxes can reduce disposable income and consumer spending,
thereby dampening demand and inflationary pressures.
3.2 MEASURE TO OVERCOME UNEMPLOYMENT IN BRUNEI USING
MONETARY AND FISCAL POLICIES

Unemployment can have significant social and economic consequences, including reduced
consumer spending, lower living standards for affected individuals and families, and potential
long-term negative impacts on skills and career prospects. Policymakers often implement
various measures, as discussed earlier, to mitigate unemployment and support sustainable
economic growth.

3.2.1 Monetary Policy

Monetary policy refers to the actions taken by a country's central bank (in the case of Brunei,
Autoriti Monetari Brunei Darussalam, or AMBD) to manage the money supply and interest
rates with the goal of achieving economic objectives such as price stability, economic
growth, and employment.

a) Reduce Interest Rates: Central banks adjust interest rates to influence borrowing
costs for businesses and consumers. Lowering interest rates can stimulate borrowing
and investment in businesses, leading to increased economic activity and potentially
lower unemployment rates as firms expand and hire more workers.
b) Reduce Discount Rates: Reducing the discount rate is a key monetary policy tool
used by central banks to lower borrowing costs for banks, businesses, and
consumers. This aims to stimulate economic activity by encouraging increased
borrowing, investment, and consumer spending, potentially leading to job creation.
Lower rates support small businesses and can enhance export competitiveness
through currency effects. However, its effectiveness in reducing unemployment
depends on economic conditions and the responsiveness of businesses and
consumers to lower interest rates.

3.2.2 Fiscal Policy

Fiscal policy refers to the government's use of taxation, public spending, and borrowing to
influence the economy. When focused on addressing unemployment specifically, fiscal policy
aims to create conditions conducive to job creation and reduce unemployment rates.

a) Reducing Tax Rates: Reducing tax rates as a fiscal policy instrument for reducing
unemployment entails cutting corporate expenses and boosting consumer disposable
 income, with the goal of stimulating economic development and job creation. Lower
taxes can encourage company investment and expansion, particularly among small
enterprises and startups, resulting in more hiring and innovation. This strategy also
aims to improve global competitiveness, attract foreign investment, and increase
exports, all of which can help to expand employment in critical areas. Overall, the
success of tax cuts in lowering unemployment is dependent on economic conditions
and how firms and individuals respond to the incentives offered.
b) Raising The Government Expenditure: Increasing government spending as a fiscal
policy for reducing unemployment entails increasing investment in infrastructure,
public services, and business assistance. This policy seeks to create employment
directly through infrastructure projects and public-sector hiring, while also driving
demand throughout the economy. Higher government expenditure tries to promote
economic development, increase competitiveness, and reduce unemployment by
assisting small firms, improving labour skills, and mitigating economic downturns.
However, the efficacy of this technique is dependent on efficient resource allocation,
economic conditions, and collaboration with other policy initiatives.
4.0 CONCLUSION

In conclusion, one of the nation’s bordering the South Chinese Sea is Brunei. Brunei is a
country rich in agricultural products, with over half of its GDP coming from the petroleum
industry. Other exports include timber, crude oil, and gas. With an average of over 180,000
barrels per day (29,000 m3/d), Brunei is the third-largest oil producer in Southeast Asia
thanks to all the export revenue from petroleum sales. Additionally, it ranks as the world's
ninth-largest producer of liquefied natural gas. With 450,500 inhabitants spread over 5,765
square kilometres.

Over the last ten years, Brunei's economy has faced several challenges, one of
which being the COVID-19 pandemic, which has had a significant impact on the country's
economic growth and activity. Despite these difficulties, the main drivers of the economy
petroleum, agriculture, and tourism remain to be these relatively stable and expanding
sectors. Petroleum exports continue to be the nation's top exports, while other important
exports that boost foreign exchange profits include agriculture and tourism. Among these
macroeconomic difficulties are unemployment and inflation, which have posed difficulties for
Brunei's economy in particular because of the COVID-19 pandemic. Interest and inflation
rates change over time, and post-COVID-19 economic recovery efforts, supply chain
disruptions, and rising energy costs have all contributed to greater inflation levels in recent
years. However, as the economy progressively recovers, the unemployment rate which
increased at the start of the COVID-19 pandemic has decreased.

To address these issues, Brunei may use specific fiscal and monetary policies to reduce
inflation and promote economic expansion. High interest rates, stringent money supply
limitations, and oversight of government spending are a few strategies for containing
inflation. In terms of hiring standards, more training initiatives, lower taxes, a wider range of
import sources, and strong governmental job services can improve both the employment
situation and the stability of the economy.

Overall, Brunei's macroeconomic environment is not so bad. The Brunei government has
achieved success in its policy to diversify the economy so that it is not too dependent on oil
and gas only.
5.0 REFERENCES

Population

https://deps.mofe.gov.bn/SitePages/Population.aspx#:~:text=%E2%80%8BLatest%20Highlights
%202022,females%20(47.2%20per%20cent).

Location and area

https://www.cia.gov/the-world-factbook/countries/brunei/

National income/GDP data

https://deps.mofe.gov.bn/SitePages/National%20Accounts.aspx

Main sector contributors to GDP

https://www.britannica.com/place/Brunei/Economy

Current economic (5 years)

https://www.focus-economics.com/countries/brunei/

Inflation rate and unemployed rate

https://www.focus-economics.com/countries/brunei/

https://www.macrotrends.net/global-metrics/countries/BRN/brunei/unemployment-
rate#:~:text=Unemployment%20refers%20to%20the%20share,a%202.5%25%20decline%20from
%202020.