BANDAR SERI BEGAWAN: Business confidence in Brunei Darussalam weakened in May as businesses faced slower consumer spending following the Hari Raya festivities, although sentiment is expected to improve in the coming months, according to the latest Business Sentiment Index (BSI) released by Brunei Darussalam Central Bank (BDCB).
The Current Business Conditions sub-index fell to 41.5 in May from 63.3 in April, placing it in the pessimistic category under BDCB’s revised methodology, which considers readings below 45 as contraction or pessimism.
According to BDCB, the weaker sentiment was largely attributed to a post-festive slowdown in consumer demand and a lack of new projects across sectors.
Businesses also pointed to sector-specific challenges, including spending being diverted to food festivals, increased competition from imported goods, geopolitical disruptions affecting supply chains and energy sector input costs, as well as higher cross-border spending.
Despite the weaker current outlook, businesses remain optimistic about near-term prospects. The one-month ahead Business Conditions sub-index rose to 64.4, indicating expectations that conditions will improve in June.
The optimism is supported by anticipated stronger production, the completion of maintenance activities, higher order volumes, new product launches and expanding market opportunities.
BDCB also announced a revision to the BSI methodology aimed at enhancing the robustness and analytical value of the index.
Previously measured on a 0-100 scale but effectively constrained to a narrow range around 50, the revised methodology now allows the index to fully utilise the entire scale. Instead of a fixed neutral value of 50, readings between 45 and 55 are now considered neutral.
The central bank said the revision does not alter the interpretation of historical results, with past data recalculated using the updated methodology to ensure comparability.
Investment sentiment remained firmly optimistic across all time horizons. The Current Investment sub-index stood at 75.5, while the one-month ahead and three-month ahead readings reached 77.6 and 76.8, respectively.
Businesses reported plans to increase spending on machinery, business expansion and renovation works, supported by new project awards and expectations of stronger seasonal demand.
Employment sentiment also improved. The Current Employment sub-index rebounded to 61.8, signalling optimism in hiring as businesses recruited staff for new projects and to replace employees who had resigned or completed contracts.
The one-month ahead Employment sub-index eased to 52.4, indicating that most businesses expect workforce levels to remain broadly stable in June, with hiring mainly for replacement purposes.
Businesses continued to report elevated operating costs, with the Current Costs sub-index registering 69.8. Respondents cited higher raw material prices, increased shipping charges and rising labour and operating expenses.
However, the one-month ahead Costs sub-index fell to 41.6, suggesting businesses expect cost pressures to moderate in the near term, particularly as freight charges and raw material prices are anticipated to ease.
Among economic sectors, Construction recorded the strongest business sentiment with an index of 67.5, driven by new project awards, favourable weather conditions, additional manpower and stronger cash flow.
Other sectors recording neutral sentiment included Manufacturing (53.7), Other Private Services (53.3), Finance and Insurance (51.4), Real Estate and Ownership of Dwellings (50.0), Agriculture, Forestry, Fisheries and Livestock (48.0), Health and Education (46.1), and Hotels and Restaurants (45.0).
Meanwhile, pessimistic sentiment persisted in Oil and Gas Related (38.5), Transport and Communication (34.8), and Wholesale and Retail Trade (31.8), reflecting weaker demand, supply disruptions and increased competition.
By business size, micro enterprises remained broadly stable with an index of 49.7, while medium-sized businesses recorded 41.9, large businesses 41.0, and small businesses 28.4, reflecting weaker consumer spending, heightened competition and fewer new project opportunities.
The BSI is based on monthly surveys of around 500 micro, small, medium and large businesses across 11 economic sectors in all four districts. The index measures business confidence across current and future business conditions, investment, employment and operating costs, and serves as a forward-looking macroeconomic indicator for Brunei Darussalam. - Borneo Bulletin/ANN
