Swift Measures Needed to Support Timor-Leste’s Economy During COVID-19

Dili, May 15, 2020 – Economic activity is forecast to contract by at least 5 percent in 2020, owing to renewed political uncertainty and the impact of the novel coronavirus (COVID-19), according to a new World Bank report released today.

The Timor-Leste Economic Report: A Nation Under Pressurewarns that the COVID-19 pandemic, with its associated health and economic impacts, requires bold policy actions and a strong political consensus to avert the deepest economic shock in Timor-Leste’s history since independence.

The global COVID-19 outbreak will produce considerable negative economic effects. International travel restrictions, trade disruptions, and public health measures to contain the spread of COVID-19 will all hamper domestic economic activity. An effective economic response plan can provide vital relief to households and businesses.

“Policymakers have the extremely difficult task of minimizing health risks while protecting people’s livelihoods. It is crucial that both health and economic policy choices consider the emerging evidence and the specific circumstances of Timor-Leste” said Pedro Martins, Senior Country Economist for Timor-Leste. “We believe that this report provides useful insights that can contribute to the design and implementation of timely and impactful economic measures in the coming months.”

The report, the latest in a twice-yearly World Bank analysis of the country’s economy, notes that public spending is likely to be constrained for most of the year, due to the lack of an approved budget for 2020 and delays owing to COVID-19. It also states that a stable political environment and a strong policy commitment to support the private sector are crucial to avert a large economic contraction.

“The Government of Timor-Leste is to be commended for its swift action in containing the health-related impacts of the COVID-19 pandemic" said Macmillan Anyanwu, Country Representative for Timor-Leste. “It is critical now to strengthen the capacity of the health system, protect vulnerable households, support affected businesses, and ensure the continuity of public services.”

The Timor-Leste Economic Report includes a Special Focus with policy recommendations for supporting the economy during COVID-19. Measures are mainly aimed at: securing a minimum level of transport services, minimizing disruptions to key supply chains (especially food), ensuring continued access to telecommunication services, easing payments for utilities and rent, anticipating and topping up existing cash transfers programs, facilitating credit and encouraging bank forbearance, deferring tax obligations, and supporting wages in key economic sectors.

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