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

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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.