BANDAR SERI BEGAWAN, July 24 (Xinhua): Brunei Darussalam Central Bank (BDCB) expects the country's inflation to remain low despite the global price hike caused by geopolitical tension.
According to the BDCB's semi-annual policy statement released on Saturday on its website, the BDCB noted that the International Monetary Fund (IMF) had revised its 2022 global growth forecast from 4.4 to 3.6 percent due to Russia-Ukraine conflict spillover effects, such as supply shocks and higher global inflation.
Meanwhile, the domestic economy contracted by 1.6 percent in 2021, the BDCB said.
"Despite the global inflation forecast which is expected to remain elevated, combined with disruptions on global supply chains which are likely to persist in the near-term, the BDCB expects its impacts on the country's overall inflation to be low given the tightening of Monetary Authority of Singapore's monetary policy thrice so far in the first seven months of the year," the BDCB said.
The BDCB's inflation forecast in the policy statement for 2022 is in the range of 2 to 3 percent.
Brunei's monetary system is based on the Currency Board Arrangement, which is underpinned by the Currency Interchangeability Agreement between Brunei and Singapore.
As the local currency Brunei dollar is pegged to the Singapore dollar at par, Singapore's monetary policy has a direct influence on monetary conditions in Brunei.
The BDCB's previous statement said that inflation in the Sultanate had been low and stable, averaging 1.2 percent over 1981-2018.
However, the latest official statistics released earlier this month showed that Brunei's inflation in March 2022 increased by 3.8 percent year-on-year, mainly due to higher import prices of cooking oil, meat and other food.
The BDCB also recorded a growth in the financial sector, with total assets increasing 7.9 percent year-on-year and a total value of 23.9 billion Brunei dollars (17.2 billion U.S. dollars) as of the first quarter of 2022.
The Islamic finance sector held 58 percent with 13.9 billion Brunei dollars, while deposit-taking institutions made up 92 percent of the total financial sector assets with an asset base of 22 billion Brunei dollars.
"Nevertheless, due to heightened uncertainties associated with the Covid-19 pandemic, as well as the still relatively low global interest/profit rates environment, profitability of the banking industry has also declined," the BDCB said. - Xinhua