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Timor-Leste's economy continues to perform well. Bank deposits grew by 10.5% year on year in the first half of 2013. Private sector credit was 10.3% higher in June 2013 than a year earlier, reaching a new high of $165.6 million. Bank lending grew strongly as well in the first half of 2013, as credit to individuals rose by 13.1% and credit to commercial and financial companies grew by 25.2%. Lending to agricultural producers also registered double-digit growth, which suggests expanded investment in coffee farms.
|Selected Economic Indicators (%) - Timor-Leste||2013||2014|
|ADO 2013||Update||ADO 2013||Update|
|Current Account Balance (share of GDP)||102.8||102.8||66.0||66.0|
Source: Asian Development Outlook (ADO) 2013 Update; ADB estimates.
The value of merchandise imports was almost three times higher in the first quarter of the year than in the first quarter of 2012. The value of nonpetroleum exports posted very high growth, albeit starting from a low base. Vehicle registrations in the first half of 2013 were 25.8% higher than a year earlier. Sales of electricity were 7.8% higher over the same period, following the completion of the national electrification program.
However, government expenditures, which are largely funded from offshore petroleum production revenues and are a main driver of nonpetroleum GDP growth, fell by 45.3% year on year in the first half of 2013. The decline was particularly pronounced in public capital expenditures, which were down by 80.7%. Recurrent expenditure fell by about 15.1%, with spending on income transfer programs falling by 25.3%. This declining expenditure casts doubt on whether the ambitious infrastructure development program budgeted for 2013 can be carried out. In view of this, growth for 2013 is now projected at 9.5% - half a percentage point lower than in the Asian Development Outlook (ADO) 2013 in April. The forecast of 10% is maintained for 2014.
Annual inflation in the first half of 2013 was 13.0%. Food costs rose by 16.3% and transport prices by 11.3%, considerably higher than the 2013 projections in ADO 2013. Although inflationary pressures are likely to moderate with public expenditure running below budget and declining international food prices, the forecast for 2013 is increased from 9.0% in ADO 2013 to 10.5%.
Income from petroleum operations will drive large current account surpluses in 2013 and 2014. In 2013, a surplus equivalent to 102.8% of nonpetroleum GDP is forecast. This surplus is expected to fall to 66.0% of nonpetroleum GDP in 2014, as projected in ADO 2013. These forecasts are significantly lower than those of earlier years because world oil prices have fallen.
Source: ADB. 2013. Asian Development Outlook 2013. Manila.