Timor-Leste: Economy

Large increases in public spending accelerated Timor-Leste’s economic growth in 2014. Growth is expected to be slower in 2015 but recover in 2016 if major investment projects proceed as planned. Inflation eased under favorable external conditions but is projected to rise in 2015 and 2016. Declining petroleum production and low energy prices highlight the need to diversify the economy by encouraging private investment.

Selected Economic Indicators (%) - Timor Leste 2015 2016
GDP Growth 6.2 6.6
Inflation 2.8 4.0
Current Account Balance (share of GDP) 55.0 51.6

Source: ADB estimates.

Economic performance

Economic growth in Timor-Leste accelerated in 2014, with the gross domestic product (GDP) excluding the offshore petroleum sector (non-oil GDP) expanding by an estimated 7.1%. Improvements in budget execution saw own-funded government expenditures rise by 26.5% as the proportion of planned expenditures that were actually disbursed improved from 62% in 2013 to over 90% in 2014. Total public expenditures, including activities funded by development partners, were equivalent to 110% of non-oil GDP in 2014.

Economic prospects

Growth is expected to slow to 6.2% in 2015 as stimulus from rising public spending eases, then rise to 6.6% in 2016 as major public and private investment projects move forward. Inflation is forecast at 2.8% in 2015 and 4.0% in 2016 as the deflationary effects of the strong dollar and low international food prices dissipate and domestic demand builds.

Excerpted from the Asian Development Outlook 2015.