With the price of oil at record lows, the small Southeast Asian nation of Brunei is quickly becoming the first oil-rich country to fall victim to an economic reliance on the energy industry. The hydrocarbon-dependent sultanate of 420,000 people now stands on the precipice of an economic calamity. At the apex of its 2008-2015 financial crisis, Greeceís budget deficit was equal to 15.7 percent of its GDP. For the 2015-2016 fiscal year, Brunei is currently on track to report a fiscal deficit valued at 16 percent of its GDP
. With economic stagnation inevitable, the likelihood that the country will remain one of Asiaís richest states grows increasingly slim.
This fall from the top is all the more astonishing given the countryís current affluence. By GDP (PPP) per capita, Brunei ranks as the 4th wealthiest country in the world, according to the IMF. Due to many years of soaring demand for its vast energy resources, this small sovereign state the size of Delaware has known no end to its oil-fueled largesse, having no income tax or sales tax for locals, offering free education through university, and subsidizing housing.
But the good times are long gone: The global price for a barrel of oil has plummeted 40 percent since January 2015 and 78 percent since its peak value in 2008. Since more than 95 percent of Bruneiís exports are oil- and gas-related, for the past three years in a row Bruneiís GDP has contracted.
This has resulted in acute strain on the countryís finances. Income from hydrocarbons comprises 90 percent of government revenue Ė as such government earnings have already dropped about 70 percent compared to the 2012/2013 fiscal year. Despite having already trimmed the $6.4 billion 2015/2016 budget by roughly 4 percent compared to last year, further spending cuts are widely expected.