Brunei's policy decision to slow the depletion of its remaining energy reserves means that the energy sector will not be a major source of economic growth in 2011-12. Some new gasfields will be brought into operation, but this not likely to happen until after 2012. The latest data show a contraction of 1.8% in GDP in 2009. This is likely to have been followed by a modest rebound in 2010. The non-energy sector will continue to make a positive contribution to GDP growth, which is expected to strengthen gradually to 1.4% in 2011, from an estimated 1% in 2010, assuming that there is no renewed dip in the performance of the global economy.

The likely return of the Bruneian economy to growth reflects a number of factors. Sustained higher oil prices may encourage the sultanate to produce more oil. A methanol plant has been completed, and began to produce and export methanol at the end of May 2010. Building work is continuing on the Pulau Muara Besar port (the first phase of which will be completed by end-2012), and construction of a power-transmission line from Malaysia to Brunei (again due for completion by end-2012) will also underpin economic activity. However, the pace of GDP growth, which is expected to average around 1.3% a year in 2011-12, will lag behind that of other countries in the region.

In the energy sector, it is highly likely that new oil reserves will be discovered in 2011-12. The forecast period will see exploration work in two offshore zones, following a recent maritime-border agreement with Malaysia. Although Brunei does not wish to see its hydrocarbon reserves depleted too rapidly, the agreement specifies co-operation in production for a 40-year period. Oil discovered in the zones would be likely to be brought into production in 2016 or 2017 (well after the end of our forecast period).

Construction work at the Pulau Muara Besar port will also serve to underpin GDP growth in the next few years. The port faces competition from transshipment hubs such as the Port of Singapore and Malaysia's Port Klang. However, the government is committed to the project, believing that the port will increase trade flows. Other sectors of interest to the government are information technology (IT), Islamic banking and renewable energy. Food processing, especially in the halal (Islamic dietary) sector, may create jobs, and the government is hoping for more visitor arrivals, but it is questionable how far tourism in a conservative Islamic country can take off. Brunei's population is very small, and there are only a few thousand unemployed people. Consequently, only one or two large investments in these sectors would do much to improve employment prospects. Larger investments may be needed to fill the gap left by the retreat of the fossil-fuel energy sector over the next few decades, and the government's plans to privatise some public services may result in job losses. However, the government is likely to proceed gradually with this agenda, allowing a slow shift of focus away from the energy sector to non-energy activities.