Publication: Timor-Leste Economic Report, January 2024 - Fit for Purpose: Crafting a Stable, Inclusive, and Resilient Financial Sector
Loading...
Published
2024-02-26
ISSN
Date
2024-02-26
Author(s)
Editor(s)
Abstract
The final national accounts for 2022 have slightly raised the non-oil growth rate, with consumption driving economic activities. The IX Constitutional Government has an ambitious target of creating some 50 000 jobs over the next five years, but the lack of economic dynamism hinders job creation for rapidly expanding workforce. In response to severe slow budget execution, the new government revised the 2023 budget, decreasing planned expenditure by 12 percent, aligning closely to the actual spending in 2022. For the first nine months of 2023, consumer price inflation remained high at 8.3 percent year-on-year, driven by a notable rise in both food and non-food prices. The growth in money supply has paralleled fiscal expansion, leading to substantial liquidity in the banking sector which remains largely unutilized by the real sector. There have been consistent trade deficits since Q4 2022, reaching 17.1 percent of gross domestic product (GDP) by September 2023.
Link to Data Set
Citation
“Rezza, A.A.; Pakpahan, Y.M.; Alibhai, S.. 2024. Timor-Leste Economic Report, January 2024 - Fit for Purpose: Crafting a Stable, Inclusive, and Resilient Financial Sector. © http://hdl.handle.net/10986/41107”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Timor-Leste Economic Report, September 2025: Land of Opportunities - How Modern Land Administration Can Unlock Timor-Leste’s Economic Transformation(Washington, DC: World Bank, 2025-09-19)Timor-Leste is at a defining moment - one that brings both urgent challenges and real opportunities to build a more resilient and prosperous future. With oil production halted, the country now relies on withdrawals from its Petroleum Fund, which can be depleted by 2038. This raises a pressing question: how can Timor-Leste build a sustainable future and preserve its fiscal buffers? The stakes are high, but so is the potential, with several pathways already emerging. Membership of the Association of Southeast Asian Nations (ASEAN) promises deeper regional integration, long-delayed infrastructure projects are starting to bear fruit, and the tourism sector is rebounding. To seize this moment, Timor-Leste needs to mobilize its financial assets to grow its private sector, but for this to happen it needs to tackle the lack of land tenure security which is a barrier to investment across the board. Get this right, and Timor-Leste can become a model for sustainable growth in Southeast Asia.Publication Timor-Leste Country Program Evaluation, 2000-2010(Washington, DC: World Bank Group, 2011-04-29)This country program evaluation (CPE) assesses the outcomes of the World Bank Group (WBG) program in Timor-Leste during the review period (2000 to 2010). The WBG’s strategy during this period was to support the government of the nascent country in three broad areas: (a) poverty alleviation and the provision of basic social services, including health and education; (b) development of state institutions, including creating good governance and building the capacity of state institutions; and (c) promoting sustainable nonpetroleum growth, especially through the development of agriculture and the private sector. The CPE rates the overall outcome of its support to the country over the review period as moderately unsatisfactory. The Bank Group strategy was broadly congruent with the country‘s own aspirations, but its relevance and effectiveness waned through the evaluation period. To boost the WBG‘s role as an effective partner in Timor Leste’s development, independent evaluation group (IEG) recommends that the WBG: (i) set its key objective as one of supporting vigorous and sustainable non-oil growth, creating jobs and improving infrastructure; (ii) in consultation with development partners, sharply prioritize its program, being realistic about time frames; (iii) increase its focus on effective human resource development for institution building and improved governance; (iv) follow more closely its own guidance on dealing with fragile states; (v) ensure more active management of its assistance program, strengthening its capacity to deliver timely high-quality policy and technical advice; (vi) be realistic with regard to the situation on the ground and what is needed to attain development objectives; (vii) make International Finance Corporation’s (IFC’s) interventions of sufficient scale to address the objectives of its program; and (viii) bolster monitoring and evaluation (M and E) by focusing on a few key results and improving statistical capacity to obtain reliable data of sufficient frequency.Publication Timor-Leste: Pathways to Economic Diversification - Country Economic Memorandum 2023(Washington DC, 2023-05-03)Timor-Leste has made important development gains since independence in 2002 but is now at a critical juncture. The government has successfully rebuilt public infrastructure, reduced poverty, and quickly built from scratch a network of functional public institutions. Despite these achievements, there is an urgent need for private sector-centered development that is not dependent on the oil sector. Receipts from sales of hydrocarbons have been the main source of government revenues, but their contribution to the economy is decreasing, raising the urgency for economic diversification. High public spending has not translated into strong and sustained economic growth. Furthermore, depleting oil reserves signal an urgency to reduce economic dependence on oil. The public sector-driven growth model has run its course and is fiscally unsustainable. The excessive public spending level led to an astronomical fiscal deficit of 45.3 percent of non-oil gross domestic product (GDP) in 2021. This fiscal stance entails significant risks that bring the country toward a damaging fiscal cliff in 2035. Albeit narrowing, there is a window of opportunity for the government to urgently implement the much-needed reforms in the next five years. There are several potential drivers for increased regional integration. These include the operationalization of the Tibar Bay port, the modernization of the Dili airport, the internet submarine cable installation, and the World Trade Organization (WTO) accession progress. Success requires a concerted and persistent government effort to address supply-side constraints, kick-start economic diversification, and boost export. This report provides an in-depth analysis of Timor-Leste’s economic performance in recent decades and proposes policies to enhance growth. It highlights two key interrelated constraints to sustained and inclusive growth: the ‘missing’ private sector and the need to tap into the growth-enhancing benefits of international trade. Given the diminishing returns of public investments, pursuing a sustainable development path will require a shift toward a more dynamic, private sector-driven growth model. Furthermore, with the right combination of a supportive enabling environment and trade policies, Timor-Leste could capitalize on incipient and established comparative advantages for its exports. Accordingly, the reforms to support private sector development and expand exports have the potential to boost Timor-Leste’s international competitiveness and improve economic diversification.Publication Timor-Leste Poverty Assessment : Poverty in a New Nation - Analysis for Action, Volume 1. Main Report(Washington, DC, 2003-05)Timor-Leste has achieved enormous progress in rehabilitating its economy, reconstructing its infrastructure, reintegrating its refugees and building the key elements of a sustainable political process in an environment of internal peace. It now faces many challenges of nation-building and of overcoming the deprivation affecting the lives of the poor. This report written in two volumes lays out the challenge of poverty reduction in Timor-Leste. It is based on the first nationally-representative household survey collected during August to December 2001. The report's objectives are modest: to set a baseline for the new country on the extent, nature and dimensions of poverty; and to assist the decision making of the newly elected government and its efforts in formulating, implementing and monitoring its Poverty Reduction Strategy. The overall objective was not to lay out the elements of poverty strategy but rather to present evidence on the basis of which the Timorese can define and refine their own poverty reduction strategy. The key challenge lies now in formulating a poverty monitoring plan that includes both quantitative and participatory elements, and lays out the institutional arrangement for data analysis and reporting to ensure that the collected data inform policy making and program design.Publication Timor-Leste Economic Report, April 2020(World Bank, Washington, DC, 2020-04)Economic activity is expected to contract in 2020, owing to political uncertainty and the impact of the novel coronavirus (COVID-19). Despite a return to economic growth in 2019, failure to approve a state budget for 2020, renewed political uncertainty, and the global COVID-19 outbreak have all considerably weighed down prospects for 2020. In addition, recent heavy rains caused floods that affected thousands of people and many businesses. Given these mutually reinforcing negative effects, the GDP growth forecast for 2020 has been lowered from 4.6 percent (as projected in the October 2019 report) to -4.8 percent. However, this projection is still subject to much uncertainty. In particular, the economic impacts of COVID-19 will largely depend on the direct impact of the virus, the scope and duration of the public health measures adopted, as well as the economic policy response. The Special Focus discusses some of the economic transmission channels and puts forward a set of policy interventions that may help cushion the impact on businesses and people’s livelihoods.
Users also downloaded
Showing related downloaded files
Publication Guinea-Bissau Country Climate and Development Report(Washington, DC: World Bank, 2024-10-23)Guinea-Bissau is endowed with a wealth of natural resources, with the highest natural capital per capita in West Africa (US3,874 dollars per capita), which could be leveraged for sustainable and resilient growth. However, Guinea-Bissau faces significant development hurdles, such as high poverty rates, political instability, and economic challenges, including an over-reliance on cashew nuts. Rural poverty has increased, and the nation's infrastructure, education, and health care systems are underdeveloped. Climate change poses a severe threat, potentially impacting agriculture, fisheries, and infrastructure. Without adaptation, it could lead to a significant cut in real GDP per capita (minus 7.3 percent by 2050) and increase in poverty (with up to over 200,000 additional poor by 2050, that is, 5 percent of the expected population, in the worst scenario). The country's low greenhouse gas emissions are expected to rise, mainly due to agriculture and land-use changes, with deforestation being a major contributing factor. Although Guinea-Bissau is a low emitter, it has high mitigation ambitions, targeting a 30 percent reduction in greenhouse gas emissions by 2030. The Nationally Determined Contribution outlines significant climate actions, with initiatives focused on forest conservation, sustainable agriculture, and community development. However, the country's political instability, institutional weaknesses, and limited financial resources pose challenges to implementing these climate commitments, which depend heavily on external funding. The financial sector's underdevelopment and vulnerability to external shocks limit its ability to support green investments, though reforms could enhance resilience. Guinea-Bissau must consider its climate financing as development financing and vice-versa, engage the private sector, and integrate climate goals with national development plans to ensure a sustainable future. Concessional climate financing is vital due to the underdeveloped financial sector and the government’s limited borrowing capacity. Addressing Guinea-Bissau's vulnerability to climate change and its structural issues requires a cohesive approach that integrates development and climate strategies. This could involve improving governance, diversifying the economy, protecting natural capital, developing human capital, and investing in sustainable agriculture and infrastructure. The transition to a more sustainable and inclusive development pathway that supports economic growth is possible, but requires focusing on key strategic sectors, enhancing institutional capacity, and creating the conditions to mobilize finance. As a highly vulnerable country, there are myriad needs in the different sectors; however, to be more efficient and effective, Guinea-Bissau should prioritize actions in a few sectors, especially actions on biodiversity, agriculture, and social protection. Low carbon development, especially in energy and forestry sectors, could provide cost-efficient solutions and attract climate finance, including from the private sector, which will support the overall development agenda.Publication Kyrgyz Republic Country Climate and Development Report(Washington, DC: World Bank, 2025-11-03)This Country Climate and Development Report (CCDR) on the Kyrgyz Republic aims to support the country’s development goals amid a changing climate. The CCDR considers two policy scenarios up to 2050: the business-as-usual (BAU) and high-growth scenarios. As it quantifies the likely impacts of climate change on the Kyrgyz economy between now and 2050, the report highlights key government actions to best prepare for and adapt to climate impacts (referred to as “with adaptation” measures), with a particular focus on the time horizon up to 2030. The CCDR also outlines a path to net zero emissions by 2050 (referred to as “with mitigation” measures, “decarbonization,” or, simply, “net zero 2050”), highlighting associated development co-benefits.Publication Gabon Country Climate and Development Report(Washington, DC: World Bank, 2025-11-01)Gabon has a unique opportunity to drive inclusive growth, reduce poverty, and build a resilient post-oil economy, with climate action accelerating progress toward these goals. The country’s main development challenge is achieving higher growth and poverty reduction, as stronger growth is needed regardless of projected climate shocks to create jobs, raise living standards, and enable a viable post-oil economy. While pursuing growth-promoting economic reforms, climate action that prioritizes people must remain central to its development pathway. However, climate change risks exacerbating poverty and regional inequalities in a country already facing long-term challenges in expanding economic opportunities and basic public services, especially in rural areas. Climate shifts compound these challenges, making stronger private sector-led growth driven by reforms essential for resilience, diversification, job creation, and poverty reduction, though targeted investments in adaptation will still be required to mitigate climate shocks. Using a whole-of-economy approach, the Gabon Country Climate Development Report (CCDR) estimates that climate change impacts could result in GDP losses of 3.5 to 5.3 percent per year through 2050 compared to a business-as-usual baseline trajectory.Publication Jobs in a Changing Climate: Insights from World Bank Group Country Climate and Development Reports Covering 93 Economies(Washington, DC: World Bank, 2025-11-05)The World Bank Group’s Country Climate and Development Reports (CCDRs) provide a crosscutting look at how countries’ development prospects, and the job opportunities they offer to their people, can be threatened by climate impacts and supported by climate policies. Climate change and policies affect jobs through impacts on productivity, energy and material efficiency, and physical, human, and natural capital. They can also transform employment opportunities, especially through complementary measures that help workers and firms adapt to and benefit from new technologies and production practices. Prepared by the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA), CCDRs integrate country perspectives, climate science and economic modeling, private sector information, and policy analysis to assess how countries can successfully grow and develop their economies and create jobs despite increasing climate risks and while achieving their climate objectives and commitments. Each CCDR starts from the country’s development priorities, opportunities, and challenges, and is developed in close consultation with governments, businesses, and civil society, ensuring the recommendations reflect national priorities. By combining evidence on adaptation, resilience, and emissions pathways, CCDRs highlight where climate action can reinforce development and job creation, and where targeted policies are needed to manage risks and smooth labor market transitions. Taken together, these elements can help create local jobs, ensure economic transitions are just and inclusive, and equip workers and firms to navigate the disruptions and opportunities of a changing climate and changing technologies.Publication Comoros Country Climate and Development Report(Washington, DC: World Bank, 2025-06-18)The Union of the Comoros (The Comoros) has significant vulnerability to climate change-related risks but has considerable opportunities to strengthen preparedness and resilience against these challenges. According to the Notre Dame Global Adaptation Index, the Comoros is the 29th-most vulnerable country to climate change and the 163rd most ready to adapt (out of 191). The Comoros archipelago is exposed to many natural hazards that adversely affect the country’s natural capital, people, and physical infrastructure. In 2014, the economic cost of climate-related disasters was estimated at 5.7 million dollars annually, equivalent to 9.2 percent of Gross Domestic Product (GDP). Between 2018 and 2023, as many as 11 tropical depressions or cyclones impacted the country, with Cyclone Kenneth causing the greatest damage, equivalent to 14 percent of GDP, resulting in total economic growth falling from 3.6 percent in 2018 to 1.9 percent in 2019. More than 345,000 people (40 percent of the population) were affected by the cyclone, with 185,000 people experiencing severe impacts and 12,000 people displaced. However, there is an opportunity for the country to grow more robust and shock-responsive, and to establish pre-positioned funding mechanisms to enhance future crisis response efforts. For the Comoros, adaptation and climate-resilient development are the key climate change focus areas, with the country projected to face 836 million dollars 2050 in additional costs due to climate-related impacts. Current plans to adapt to the impacts of climate change in the Comoros include efforts to improve water management, strengthen coastal protection, and develop climate-smart agriculture practices. Given the country’s reliance on its natural resource base for economic growth and mobility, protection of these resources from climate change will be essential for promoting resilient growth and development. In addition to growing the adaptive capacity of the country’s natural resource sectors, strategic economic diversification will be important to help minimize future climate impacts, and development activities will need to be undertaken in such a way as to attract low-carbon co-benefits. The Union of the Comoros is committed to addressing climate change through its Nationally Determined Contribution (NDC) and national priorities. The country’s NDC (which was revised in 2021 for a ten-year horizon) sets ambitious targets, with a goal of reducing greenhouse gas emissions by 23 percent by 2030. The country also plans to significantly increase the share of renewable energy in its energy portfolio, reaching 33 MW by 2030. This will not only promote low-carbon development but also reduce the country’s dependency on imported oil and coal, which currently make up 95 percent of the energy mix. Additionally, the Comoros has declared its intention to increase CO2 removals by 47 percent by 2030, compared to BAU.