DILI, TIMOR-LESTE – Non-oil GDP growth forecasts for Timor-Leste for 2014 and 2015 have been trimmed to 8% from an earlier projection of 8.5% as private sector credit growth stalled in the first quarter, says the Asian Development Bank’s (ADB) new issue of Pacific Economic Monitor launched today.

The report says that rising government spending is maintaining a high growth rate, but will likely add to price pressures next year. The inflation forecast was cut sharply to just 3% for 2014, due to early year inflation outcomes and measurement adjustments, but is likely to rise to 5.4% in 2015.

“The economic outlook for Timor-Leste remains bright, but the country is facing declining oil royalties in coming years, which means the days of rising public budgets are coming to a close,” said Shane Rosenthal, ADB’s Country Director in Timor-Leste. “As the role of public expenditure in fueling growth recedes, growth in private sector businesses will have to pick up the slack aided by government investments to improve Timor-Leste’s public infrastructure and business environment.”

The Pacific Economic Monitor this year focuses on labor market challenges in the region. The 2013 Labor Force Survey in Timor-Leste found that only about 30% of the working-age population was actively participating in the labor market, while a majority of the population still depends on subsistence agriculture for its livelihood.

With 41% of the population under the age of 15, and around 20% in the 15–24 age range, new jobs and improved income generation opportunities for subsistence workers are urgently needed to stem poverty and ensure that development is inclusive. Labor market reforms and investments in human capital offer promising ways to enhance the skills and job prospects of Timor-Leste’s young people, the report says.

The Pacific Economic Monitor is a bi-annual review of economic developments in ADB’s 14 developing member countries in the Pacific region. Each issue includes policy briefs on a subject of current importance to the region.

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