Publication: Timor-Leste Economic Report, October 2018: Regaining Momentum?
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2018-10
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2018-12-18
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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.
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“World Bank Group. 2018. Timor-Leste Economic Report, October 2018: Regaining Momentum?. © World Bank. http://hdl.handle.net/10986/30998 License: CC BY 3.0 IGO.”
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