Publication: Timor-Leste Economic Report: Leveraging WTO Accession for Economic Transformation
Loading...
Published
2024-09-30
ISSN
Date
2024-09-30
Author(s)
Editor(s)
Abstract
Preliminary estimates from INETL, the Timor-Leste National Statistics Office, suggest that the economy grew by 2.3 percent in 2023, following growth of 2.9 percent in 2021 and 4.0 percent in 2022. The subdued economic growth in 2023 reflects the fiscal drag and low budget execution rates resulting from the Parliamentary Election and subsequent change in government. Private consumption increased by 3.2 percent, potentially fueled by substantial remittance inflows. The reliance on public sector-driven economic activity over the past decades has exerted a substantial influence on Timor-Leste's labor market dynamics. In particular, the decline in non-oil per capita GDP since the political impasse in 2017 has been reflected in a decrease in labor productivity. Accordingly, wage levels have significantly decreased, with those possessing higher levels of education experiencing a steeper decline. Persistent slow budget execution continues to hinder economic performance. By May 2024, approximately 25 percent of the total Central Government budget and 6 percent of the Capital and Development budget had been expended. These figures align with historical average execution rates of 25 percent and below 11 percent for the respective categories between 2015 and 2024. Substantially higher execution rates are necessary, though not necessarily sufficient, to achieve the desired higher levels of economic growth. The strengthening of the US dollar has contributed to an easing of price pressures, yet food inflation remains persistently elevated. In the first quarter of 2024, the Nominal Effective Exchange Rates appreciated by 1.0 percentage points due to the global strength of the US dollar. This partly helped ease inflation in tradable goods, which decreased to 4.7 percent in the first four months of this year from an average of 11.9 percent year-on-year during the same period last year. Nevertheless, despite stable or slightly increasing prices in most consumption categories, rice prices have risen substantially, driven by reduced international supply and slower domestic harvests due to unpredictable rainfall. The balance of the Petroleum Fund (PF) remained relatively stable. As of the end of March 2024, the PF's capital was valued at USD 18.45 billion, representing 11 times of the 2023 GDP, and reflecting a modest increase of 3.4 percent from USD 17.83 billion at the same time last year. This growth was driven by higher than-expected oil and gas prices in 2023, the payment of petroleum revenues from FY 2022 transferred to the Fund in FY 2023, and reduced withdrawals due to low budget execution amid the political transition.
Link to Data Set
Citation
“World Bank. 2024. Timor-Leste Economic Report: Leveraging WTO Accession for Economic Transformation. © World Bank. http://hdl.handle.net/10986/42214 License: CC BY-NC 3.0 IGO.”
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 Economic Report, May 2021(World Bank, Washington, DC, 2021-05)COVID-19 is spreading quickly throughout the country, despite early successes in containing the virus. Meanwhile, flooding and landslides have caused considerable human loss and economic damage. These compounding health and humanitarian emergencies are undermining the economic recovery in 2021, but the recent approval of a revised budget can alleviate the negative impacts. Economic activity has been weakened by the recent COVID-19 outbreak and the impact of Cyclone Seroja. GDP is forecast to grow by 1.8 percent in 2021, which is lower than the 3.1 projected in October 2020. The economy is expected to recover in the medium-term, but structural constraints will remain an impediment to faster growth. Reforms to boost productivity and competitiveness are critical. COVID-19 and recent floods have highlighted and exacerbated underlying weaknesses in Timor-Leste’s health system. Disruptions to health and nutrition services arising from these crises may have a multiplier effect on access to care for routine and essential care, setting back the country’s progress on health outcomes and human capital development.Publication Timor-Leste Economic Report, July 2023(Washington, DC: World Bank, 2023-08-25)Timor-Leste’s economy continued its recovery in 2022, expanding by 3.9 percent, fueled by public consumption and investment. Private investment rose from an exceptionally low level while net exports continued to be a drag on growth. Headline inflation soared in March 2023 at 9.6 percent, spurred by significant increases in food and non-food prices. High inflation is part of a global trend driven by prices of tradable goods. Within Timor-Leste, the government’s policy of enforcing higher excise taxes on tobacco products, implementing import taxes, and applying excises to sugar and sugary beverages, partially drove the inflationary trend. To advance a reform agenda, the new government may want to consider institutionalizing fiscal consolidation through robust fiscal rules. Both revenue mobilization and expenditure rationalization efforts should not only be maintained but also enhanced. Given that significant increases in public spending have had a limited impact on Timor-Leste’s medium-term economic growth, it is possible to sustain growth levels with a reduced budget.Publication Timor-Leste Economic Report, December 2021(World Bank, Washington, DC, 2021-12-01)Given the finite nature of petroleum resources and associated sovereign wealth fund, it iscritical for Timor-Leste to build a strong foundation for sustainable revenue mobilization tofinance public spending on development and poverty reduction. Timor-Leste faces the risks ofa fiscal cliff as, under the current spending trajectories, the Petroleum Fund may be fullyexhausted in about ten years. In line with the recent Government’s efforts, there is an opportunity to collect more revenue using value-added and property taxes. The income tax rate is among the lowest in the world while most excise tax rates are insufficient. The authorities may consider to: (i) introduce a value-added tax (VAT); (ii) raise outdated excise tax rates; (iii) increase income tax rates, with a view to promoting greater alignment with regional peers; (iv) improve revenue administration by modernizing the tax system and investing in capacity; and (v) evaluate the potential of a property tax and reporting on tax expenditures (while planning a gradual phasing out).Publication Timor-Leste Economic Report, October 2018(World Bank, Washington, DC, 2018-10)The economic outlook for 2018 remains uncertain, partly hinging on the execution of the state budget. Economic activity was sluggish in the first half of 2018, as inferred by lacklustre public spending, weakened trade levels, and slower credit growth. The recently approved 2018 budget proposes a substantial expenditure increase in the last four months of the year, to offset eighteen months of constrained spending. This presents a significant challenge for the public sector and budget execution rates may be lower than usual, due to the limited time to spend funds. Moreover, a proportion of the 2018 budget will be used to settle previous financial commitments for activities already undertaken, expenditure arrears, rather than create new economic activity. Overall, it is unlikely that this expansionary fiscal stance will considerably influence domestic economic activity in the short-term. GDP is forecast to grow by 0.8 percent in 2018, under a fairly positive scenario for budget execution. Political uncertainty affected consumer and business confidence until recently, but private investment may pick up in late 2018. The construction sector is set to recover, partly through the Tibar Bay Port, as well as agriculture if weather conditions are favourable. The broader implications of two consecutive years of disappointing economic performance are yet to be gauged, such as the impact on employment levels and earnings, labour productivity, and household incomes. In the medium-term, economic growth is expected to recover by 2019.
Users also downloaded
Showing related downloaded files
Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication Morocco Economic Update, Winter 2025(Washington, DC: World Bank, 2025-04-03)Despite the drought causing a modest deceleration of overall GDP growth to 3.2 percent, the Moroccan economy has exhibited some encouraging trends in 2024. Non-agricultural growth has accelerated to an estimated 3.8 percent, driven by a revitalized industrial sector and a rebound in gross capital formation. Inflation has dropped below 1 percent, allowing Bank al-Maghrib to begin easing its monetary policy. While rural labor markets remain depressed, the economy has added close to 162,000 jobs in urban areas. Morocco’s external position remains strong overall, with a moderate current account deficit largely financed by growing foreign direct investment inflows, underpinned by solid investor confidence indicators. Despite significant spending pressures, the debt-to-GDP ratio is slowly declining.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Europe and Central Asia Economic Update, Spring 2025: Accelerating Growth through Entrepreneurship, Technology Adoption, and Innovation(Washington, DC: World Bank, 2025-04-23)Business dynamism and economic growth in Europe and Central Asia have weakened since the late 2000s, with productivity growth driven largely by resource reallocation between firms and sectors rather than innovation. To move up the value chain, countries need to facilitate technology adoption, stronger domestic competition, and firm-level innovation to build a more dynamic private sector. Governments should move beyond broad support for small- and medium-sized enterprises and focus on enabling the most productive firms to expand and compete globally. Strengthening competition policies, reducing the presence of state-owned enterprises, and ensuring fair market access are crucial. Limited availability of long-term financing and risk capital hinders firm growth and innovation. Economic disruptions are a shock in the short term, but they provide an opportunity for implementing enterprise and structural reforms, all of which are essential for creating better-paying jobs and helping countries in the region to achieve high-income status.