Two of the world's smaller and most overlooked oil producers are vying for the unwanted title of enduring the world's longest recession.
Both Brunei and Equatorial Guinea have seen their economies contract every year since 2013 and, following revisions by the IMF this week, both are expected to remain entrenched in recession for a fifth straight year in 2017.
Puerto Rico, the debt-laden territory of the US (rather than an independent state), is also expected to see its economy contract for a fifth straight year, vying for the uncoveted title. (Syria may have been in recession for longer but the IMF stopped collating data when the country's civil war erupted in 2011.)
A higher-profile trio of troubled countries, Libya, Yemen and Venezuela, racked up a third straight year of contraction in 2016. However the IMF expects all bar Venezuela to return to growth this year, despite the ongoing war in Yemen and instability in Libya.
Brunei, where the energy sector accounts for 60 percent of economic output and 90 percent of exports, has seen its economy contract by 2.1 percent in 2013, 2.5 percent in 2014, 0.4 percent in 2015 and an estimated 3.2 percent in 2016, according to the IMF, as the first chart shows.
In October 2016, the fund forecast that the small Southeast Asian sultanate would return to decent growth, of 3.9 percent, this year. However in an update published this week it reversed course, and is now pencilling in a fifth straight decline, of 1.3 percent. As a result, gross domestic product per capita, while still high by regional standards, thanks to Brunei's fossil fuel wealth being shared among just 430,000 people, has fallen from 48,900 Brunei dollars in 2012 to an estimated BN$41,400 ($29,400).
Measured in US dollars (at current prices, unadjusted for inflation) Brunei has gone from having the world's 17th highest income per head in 2012 to the 31st this year, falling below the likes of Hong Kong, South Korea and Puerto Rico, despite the latter's woes.
Hassanal Bolkiah, the Sultan who has ruled since 1967, has, at least, managed to maintain his wealth at $20bn, according to Forbes, including a 1,800-room palace and an estimated 6,000 cars.
Ranil Salgado, division chief of the IMF's Asia and Pacific department, attributes the long-running recession to the decline in global energy prices since 2014 allied to “production challenges associated with ageing oil and gasfields in Brunei”.
Oil production peaked at 221,000 barrels a day in 2006 but has since fallen to 127,000, as of 2015, according to the BP Statistical Review of World Energy, as illustrated in the second chart. Natural gas production has held up somewhat better, but has still slipped from 12.8bn cubic metres a year in 2011 to 11.9bn. Without new discoveries, the country's oil and gas reserves will run out by 2039, BP estimates.
Given that the income from hydrocarbons accounts for 90 per cent of government revenue, “the government has been following an appropriate process of fiscal consolidation . . . and that has led to government spending restraints,” exacerbating the economic slowdown, says Mr Salgado. Despite this, government spending rose from 29.7 per cent of GDP in 2011 to 39.8 percent last year, even as revenues tumbled from 55.3 percent of GDP to just 17.9 percent. As a result, Brunei swung from a fiscal surplus of 25.6 percent of GDP to a deficit of 21.9 percent, as seen in the third chart.
Brunei's population has grown used to generous welfare benefits including subsidised housing and free healthcare and education, right up to university level. There is no personal income tax or sales tax. FTCR, an independent research service from the Financial Times, found in 2015 that 70-80 percent of the country's citizens were employed by the public sector. Brunei is attempting to diversify away from an over-reliance on hydrocarbons by venturing into Islamic finance and halal food production, although progress has been slow. Plans to launch a stock exchange this year have yet to reach fruition.
Instead, the sultan has implemented tougher social controls, introducing a strict sharia-based penal code for residents of the country including fines or jail terms for offences such as pregnancy outside marriage and failure to perform Friday prayers.
The IMF expects Brunei to return to modest growth, of 0.7 percent (still below population growth of 1.3 percent, and the Fund's October 2016 forecast of 1.8 percent) in 2018, however, before taking off in 2019.
“We think that growth will turn positive, starting in 2018, for a number of reasons, mainly due to investment in the gas sector. We have major FDIs [foreign direct investments] into projects related to the gasfields,” says Mr Salgado.
“This will subsequently lead to additional production of gas. We expect that to begin starting in 2019. We will see substantial export and GDP growth related to that.” The woes of Equatorial Guinea could last much longer, however. The west African state saw its GDP contract by 4.1 percent in 2013, 0.5 percent in 2014, 7.4 percent in 2015 and an estimated 10 percent last year, as depicted in the fourth chart, particularly painful in a country whose population is expanding by 2.9 percent a year.
And not only is the IMF pencilling in further contraction of 5 percent this year, it is expecting further shrinkage every year until at least 2022.
Government revenues have tumbled from 28 percent of GDP in 2012 to a forecast 16.7 percent this year, leading to public spending cuts that have even pushed Equatorial Guinea's non-oil sector into recession since 2014.
Despite austerity, the country had the third largest fiscal deficit in sub-Saharan Africa last year (behind only South Sudan and DR Congo) of 16.4 percent of GDP, and its debt-to-GDP ratio has risen from 7.3 percent to 24.5 percent over the same period.
FDI has been negative every year since 2009 while large current account deficits mean its foreign reserves, equivalent to 6.6 months of imports in 2013, have fallen to zero, as seen in the final chart.
“Highly hydrocarbon-dependent Equatorial Guinea has been severely hit by falling oil production and low oil prices,” said Nérée Noumon, an IMF economist.
“Oil accounts for 60 percent of GDP, 80 percent of fiscal revenue, and 86 percent of exports. Despite the oil sector's state of decline, the non-oil sector is small with little contribution to government revenues, GDP, or exports, leaving the country struggling to meet its development agenda.”
Despite this, in theory at least, Equatorial Guinea remains the richest country in Africa, with per capital GDP of $16,344 in 2015. However, the political backdrop under President Teodoro Obiang Nguema Mbasogo, who has been in power since 1979, making him the world's longest serving non-royal head of state, ensures few people see any meaningful share of these relative riches.
