Seriously, our country, Brunei Darussalam is in the coldrum economically. The GDP had been rather a flatliner since 2006 - GDP figures: 4.4% in 2006, 0.2% in 2007, -1.9% in 2008, -1.8% in 2009. On the same token our neighbors had been blazing through with >6% of GDP annual growth. During that same reporting period, our CPI had been steadily increasing from 0.2% in 2006, 0.3% in 2007, 2.7% in 2008 and 1.8% in 2009.
From the above, it is my observation and contention that our country had been experiencing an episode of STAGFLATION for the last 5 years. An episode of mediocre economic growth with steady increase of inflation. I am wondering if JPKE, BEDB and MOF is fully aware of the situation.
So what can the country do about it? Can stagflation be cured? Yes it can! and it is quite straight forward things to do.
Before embarking on the remedies we need to understand the word STAGFLATION. It is a combination of two words - Stagnate and Inflation. Brunei is currently facing a stagnate growth and an increasing inflation.
As Dato Paduka Dr Hj Ismail pointed out in the article, Brunei need to seriously embark on implementing the RKN projects soon rather than later. Our government needs to spur economic activities with massive spending. Current allocation of B$1.05 billion (2011/12) for developments just does not cut it anymore. This had been shown many times with the annual state budgets that were being approved. Time after time, the budget is just too small for the country's current needs and population expectations. A malay proverb would say "tahi gigi pun nda cukup". Furthermore, the local is not reaping the benefits that arises from government spending. In my observation, it was the foreigner that had been laughing all the way to the bank!
Having said that, Brunei do needs to do serious spending. I mean real serious spending. How do we know that Brunei is spending correctly? We need to test it with these 3 simple questions:
- Does the public spending create productive jobs for those who would be otherwise unemployed?
- Will the newly hired workers have meaningful income that they can spend back in the economy?
- Is the output of the jobs adding to capacity of goods and services demanded?
If the answers to all the above is YES, then spend! The country needs that spending. The population needs more Brunei dollar and only government has the capacity and authority to create and issue Brunei dollar. In my perspective, government spending create population wealth.
So that's how you cure stagnation - massive government spending.
Now, coming to inflation. Majority of us would say that if government initiate massive spending, then inflation will follow suit. However, if you had been observing the business news, you will notice that countries tackle their inflation with the manipulation of the country's interest rate.
High interest rate reduce inflation as people save up - taking advantage on saving rates being offered. It also make people borrow less money as high interest rate is burden to a borrower. High interest rate also make a country currency appreciate higher thus making imports cheaper. And vice versa for low interest rate situation.
Now with AMBD (defacto Brunei Central Bank) in existence, the government has the ability to manipulate the county's interest rate. Or the government can always reduce its spending, however that would be an extreme case.
In summary, Brunei is currently experiencing stagflation. To overcome this economic malaise, government must initiate massive public spending. At the same that public spending must benefit the local either through employment or business opportunities.
