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publication November 5, 2020

October 2020 Timor-Leste Economic Report: Towards a Sustained Recovery

The Timor-Leste Economic Report provides an up-to-date assessment of key economic developments, presents the World Bank's forecasts and outlook for Timor-Leste and provides an in-depth examination of selected policy issues relevant to Timor-Leste

Key findings:

  • The COVID-19 pandemic and renewed political instability have taken a heavy toll on the economy. The lack of a 2020 budget constrained public spending, while public health measures and voluntary changes in behaviour have weakened private sector activity. 
  • The economic response package – financed through a special fund – provided some relief to households and businesses.
  • Public expenditure declined by 7 percent in the first half of 2020. Spending on capital projects was particularly affected. Domestic revenues suffered from lower economic activity and temporary relief measures (e.g. electricity subsidy).
  • Exports declined by 46 percent in the first half of the year, mainly due to lower travel services. Imports decreased by 20 percent, with services declining further than goods. 
  • Gross domestic product (GDP) is expected to contract by 6.8 percent in 2020 due to the combined impacts of COVID-19 and political uncertainty (earlier in the year). 
  • A second wave of COVID-19 infections is a key external risk to the outlook, while political instability remains the main internal risk. Strengthening health preparedness and building a durable political consensus are important preconditions for a robust and sustained economic recovery.

"Public health measures were crucial to contain the spread of COVID-19, and the economic response package has provided much-needed relief to households and businesses. However, the impact on the economy has been significant, and will likely lead to irreversible income losses, unemployment, and firm closures, and thus increase the poverty rate. The timely approval of a 2021 state budget and the implementation of the economic recovery plan will be key to assist the economy."
Pedro Martins
Senior Country Economist for Timor-Leste