'Bank runs unlikely in Brunei'

BANK RUNS and other financial troubles hounding countries like Hong Kong and Singapore are not likely to happen in Brunei, according to an economist at the global research division of Standard Chartered Bank in Singapore.

"Countries that are not so connected (to) the global system Malaysia, Brunei are hardly affected by this financial crisis," Alvin Liew said in a talk on the global economic outlook for Brunei at Universiti Brunei Darussalam yesterday.

Brunei, however, cannot be complacent about its financial health and ignore the repercussions of the global financial crisis, particularly in relation to its plans of diversifying economic activity.

"The flip side is that on a longer term basis, we know that the government plans to diversify the economy ... which is a good thing. But this currency crisis points out to danger if they diversify to oil and financial services, that would tip the economy down much faster," Liew said.

He said that with Brunei being one of the main oil exporters in the region, with 90 per cent of the revenue coming from the oil and gas sector, Brunei has benefitted from the strong oil prices as seen in the past 12-18 months.

"(But) it could also be the Achilles heel for the country, where countries like Indonesia and Malaysia, who also have oil exports, would be inevitably affected in the price easing. The truth is that there could be more of a downside to it because the global economy looks weak," he added.

He added that in terms of currency, the world will see the US dollar strengthening still because of the natural and logical choice of securing funds in the US currency.

"Logically, even though their economy is going through a recession, there is seriously no safe haven to run to, so people will still run to the US," he said. "On the longer term, they will still look at a multi-year depreciation trend but for this year, at the end of the year, the Brunei and Singapore dollars will end at 1.49 to 1.50 against the US dollar," he added.

Liew also said that next year, weaknesses are likely to persist right up to the middle of 2009 where he views that after most of the currencies have found the bottom, they will start strengthening against the US dollar. "It will not be to the levels that we have seen but they will make up for the losses that happened from August till the middle of 2009, but they will not return back to the highs that we have seen in 2008," said Liew.

He said that he thinks growth for 2008 for Southeast Asia and Brunei will be fine, but a bit slower than in 2007 however, the problem and challenge will come in 2009 where most of the Southeast Asian markets have been downgraded to 3 per cent of the lower growth for 2009.

"I think the risk is still on the downside for 2009 especially with this global slowdown that is sharper than expected," he added.