Publication:
Timor-Leste: Pathways to Economic Diversification - Country Economic Memorandum 2023

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dc.contributor.authorWorld Bank
dc.date.accessioned2023-05-03T20:27:44Z
dc.date.available2023-05-03T20:27:44Z
dc.date.issued2023-05-03
dc.description.abstractTimor-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.en
dc.identifierhttp://documents.worldbank.org/curated/en/099050223202518298/P174756001cb4f0ca082810d8678cde9d09
dc.identifier.doi10.1596/39780
dc.identifier.urihttps://openknowledge.worldbank.org/handle/10986/39780
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington DC
dc.rightsCC BY-NC 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by-nc/3.0/igo/
dc.subjectPRIVATE SECTOR
dc.subjectECONOMIC DIVERSIFICATION
dc.subjectREGIONAL INTEGRATION
dc.subjectINCLUSIVE GROWTH
dc.titleTimor-Leste: Pathways to Economic Diversification - Country Economic Memorandum 2023en
dc.typeReport
dspace.entity.typePublication
okr.crossref.titleTimor-Leste: Pathways to Economic Diversification - Country Economic Memorandum 2023
okr.date.disclosure2023-05-03
okr.date.lastmodified2023-05-03T00:00:00Zen
okr.doctypeCountry Economic Memorandum
okr.doctypeEconomic & Sector Work
okr.docurlhttp://documents.worldbank.org/curated/en/099050223202518298/P174756001cb4f0ca082810d8678cde9d09
okr.guid099050223202518298
okr.identifier.docmidP174756-01cb4f41-c8b5-4dca-8281-d8678cde9d09
okr.identifier.doihttp://dx.doi.org/10.1596/39780
okr.identifier.externaldocumentum34054705
okr.identifier.internaldocumentum34054705
okr.identifier.report181870
okr.import.id624
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099050223202518298/pdf/P174756001cb4f0ca082810d8678cde9d09.pdfen
okr.region.administrativeEast Asia and Pacific
okr.region.countryTimor-Leste
okr.sectorCentral Government (Central Agencies)
okr.topicMacroeconomics and Economic Growth::Economic Growth
okr.topicMacroeconomics and Economic Growth::Economic Forecasting
okr.unitEFI-EAP-MTI-MacroFiscal-2 (EEAM2)
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