Timor-Leste: Economy

Projections for growth in the economy in Timor-Leste excluding the offshore petroleum sector remain unchanged from earlier estimates at 6.2% in 2015 and 6.6% in 2016.

Selected economic indicators (%) 2015 2016
  ADO 2015 Update ADO 2015 Update
GDP Growth 6.2 6.2 6.6 6.6
Inflation 2.8 1.8 4.0 3.0
Current Account Balance (share of GDP) 55.0 52.2 51.6 46.5

Source: ADB estimates.

Economic performance

Government expenditure—the main driver of the nonpetroleum economy—increased by 36.7% in the first 7 months of 2015 over the same period a year earlier. Increased funding for the Special Administrative Region of Oecusse, with offsetting reductions in planned transport and electricity investments, caused a large spike in government expenditure on transfers.

Expenditure on public sector wages, goods and services, and minor capital works all increased, but spending on capital investment declined significantly.

Inflation has remained low, averaging only 0.8% year on year from January to June 2015, but picked up in recent months as food prices rose moderately.

The continued appreciation of the US dollar (which Timor-Leste uses as its currency) against the currencies of trading partners has contributed to low inflation. From January to June, the dollar appreciated by 7%–13% against the currencies of Indonesia, Malaysia, and Singapore. Low inflation through the first half of 2015 prompts lower inflation forecasts for 2015 and 2016. The value of merchandise imports in January–May fell by 55% year on year, largely because international prices for fuel and other commodities were down. However, imports of vehicles and machinery increased by 14.8%, suggesting strong underlying demand. Registrations of motorcycles, light commercial vehicles, and heavy trucks all increased in the first quarter, though car registrations fell slightly.

Economic prospects

The government has proposed reducing expenditure by 20%, from $1.6 billion in 2015 to $1.3 billion in 2016. If fully implemented, this would likely dampen growth in 2016.

Low oil prices are now expected to narrow the current account surplus in both 2015 and 2016 more than forecast in the Asian Development Outlook 2015.

Excerpted from the Asian Development Outlook 2015 Update.