Timor-Leste Economic Report, March 2018
Gross domestic product (GDP)1 growth is expected to have fallen sharply in 2017 to a projected -1.8 percent from 5.3 percent the year before. This contraction is driven by a reversal of trend in government spending. In the last six months, the poli...
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/889001521523777495/Timor-Leste-economic-report-March-2018 http://hdl.handle.net/10986/29513 |
| Summary: | Gross domestic product (GDP)1 growth is
expected to have fallen sharply in 2017 to a projected -1.8
percent from 5.3 percent the year before. This contraction
is driven by a reversal of trend in government spending. In
the last six months, the political impasse has worsened,
with the President declaring a ‘serious institutional
crisis’ and dissolving Parliament in January 2018. The
current government has not been able to pass its
rectification budget for 2017 nor a budget for 2018 to date.
The resulting tight budget envelope has led to a sharp
reduction in government expenditure of some 24 percent
year-on-year, especially felt in the last three months of
the year. With government expenditure making up about 75
percent of GDP, weakening expenditure has had a significant
downwards impact on growth in 2017. Offshore petroleum
production has continued to gradually decline over 2017 as
existing fields are steadily depleted, while coffee exports
were lower in 2017 due to poor weather conditions.
International arrivals by air continued to grow, suggesting
that the international visitor market has held up. Private
consumption has been more robust in 2017, but investment,
both public and private, has declined and foreign direct
investment (FDI) has dried up. There remains an urgent
long-term agenda of development in Timor-Leste which a new
government program could focus on. Key priority reform areas
include addressing the multi-sectoral challenge of severe
malnutrition, improving systems of public service delivery,
supporting a broadening and diversification of the economy,
and putting environmental and fiscal management back on a
sustainable path. Existing fiscal reserves provide a golden
opportunity to achieve these reforms, but only if they are
utilized to support a transition to a long-term sustainable
economic and fiscal model. |
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