DILI, TIMOR-LESTE (28 April 2021) — Timor-Leste’s economy is expected to grow in 2021 and 2022, supported by large public investments and the government’s Economic Recovery Plan. The growth prospects are clouded by a surge of coronavirus disease (COVID-19) cases since March 2021 and severe damage from the flooding in April, according to a new report from the Asian Development Bank (ADB).
The Asian Development Outlook (ADO) 2021 projects Timor-Leste’s non-oil gross domestic product to grow 3.4% in 2021, following a contraction of -7.9% in the economy in 2020. Inflation will edge up, partly because of higher international food prices. Inflation is forecast to increase to 2.0% in 2021 from 0.5% in 2020. The forecast assumes that the country can keep the pandemic in check.
“The government’s disaster response and stimulus package will help reduce the socioeconomic impact of the floods and the COVID-19 lockdown on Timor-Leste’s economy, while vaccine deployment progresses,” said ADB Country Director for Timor-Leste Sunil Mitra.
Timor-Leste’s key policy challenge is positioning the country for post-pandemic recovery, while implementing measures to boost the economy’s productivity, according to the report. The government’s Economic Recovery Plan acknowledges the urgency in tackling this issue, with high levels of youth unemployment and the expected closure of current oil fields in 2022–2023. Under the plan, public spending is set to rise by 30% in the next 3 years, financed mostly by the Petroleum Fund.
The increased public spending will support agriculture, education, health, social protection, and tourism, as well as infrastructure related to these sectors. The government’s 2021 budget has allocated more funding for health and education, while continuing to develop infrastructure, with new loans for air transport, roads, energy, water and sanitation, and housing in 2021.
Since 1999, ADB has provided Timor-Leste loans, grants, and technical assistance worth $443.63 million. ADB has focused on assisting the country in reducing infrastructure bottlenecks and removing institutional constraints to pave the way for a more sustainable economy. ADB has helped Timor-Leste strengthen transport connectivity to reduce inequality; upgrade water supply and sanitation to deliver better health outcomes; improve regional cooperation and integration; invest in agricultural value chains to boost rural prosperity; and expand financial and digital services. ADB’s project pipeline also supports the government’s health and economic responses to the COVID–19 pandemic.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.