Economic Outline

flag East-Timor East-Timor: Economic Outline

Economic Indicators

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East Timor is a young nation which become independent in 2002. Despite impressive progress since independence, East Timor is still one of the poorest countries in Asia and its economy is heavily dependent on foreign aid and oil (which represents more than 95% of total export revenues). After growing 1.8% in 2019, due to the outbreak of the COVID-19, GDP growth was estimated at -7.6% in 2020 and picked up to 1.8% in 2021. It should reach 3.8% in 2022 subject to the post-pandemic global economic recovery and the completion of the Tibar commercial port project. Private consumption is also set to sustain growth, while the weaker global situation should hinder private investment.

Historically, the government failed to spend as much as its budget allowed and has been running a budget deficit following a very significant increase in government expenditure and poor oil revenues. Timor Leste should record a fiscal deficit of 35.1% of GDP in 2021 up from 26.6% in 2020 as the government looks to increased budgeted expenditure by at least 27.0% up to USD 1.9 billion from USD1.5 billion. The oil industry makes up 75% of total revenues, followed by international aid (around 19% of revenues). Timorese public debt has been very low in the past years and it was estimated at 12.3% for 2020 and 16.5% for 2021, with a forecast at 18.5% for 2022. Foreign currencies reserves are high, at around 6 months of imports. Inflation stood at 0.5% in 2020 and 1.6% in 2021. It is expected to pick up to 2.5% in 2022 and 2.8% the following year, on the back of a rise in global food prices (World Economic Outlook IMF, October 2021). The country has made excellent progress in state building and improving key social services, but its human development indicators remain among the lowest in the region. The government deposits all oil income in the Petroleum Fund, which is not counted as part of GDP but reflected in government revenue figures. Investment returns from the Petroleum Fund have been particularly high, increasing the fund's balance to USD 16.6 billion in 2019. However, the prospect of depletion of its energy resources is forcing the country to face the challenge of diversifying its economy. The priorities of East Timor are to reduce its dependence on oil revenues, by developing agriculture, tourism and light industries, to create employment (mainly in rural areas) and to improve the quality of public services. The country enjoys political stability, and the Democracy Index 2021 ranks Timor-Leste the 7th country in Asia in terms of democracy. Elections in May 2018 saw the appointment of a new Prime Minister, Taur Matan Ruak, from a coalition of the Alliance for Change and Progress (AMP), (composed of three parties: National Congress for Timorese Reconstruction (CNRT) and the Popular Liberation Party (PLP) and KHUNTO). Timor-Leste is still trying to become a member of ASEAN, although some member countries postponed the decision to 2021.

With 60% of the population under 25 years of age, East Timor is one of the youngest countries in the world. The country have achieved lower middle-income status and aspires to become an upper middle income country by 2030. Unemployment Rate in East Timor increased to 5.06% in 2020 from 3% in 2019 (National Statistics Directorate, Timor, 2022). In the long-term, the East Timor unemployment rate is projected to trend around 3.6% in 2022 and 3.2% in 2023 according to the World Bank econometric models. Poverty is declining at a faster pace than in most countries, but employment opportunities in the formal sector are limited and 41.8% of the population still lives below the national poverty line, particularly in rural areas where the majority of the population lives with little or no access to markets.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 2.021.78e1.701.781.88
GDP (Constant Prices, Annual % Change) 1.8e-7.6e1.83.82.6
GDP per Capita (USD) 1,5611,348e1,2631,3011,344
General Government Gross Debt (in % of GDP) 9.6e12.316.518.520.3
Inflation Rate (%) 0.90.51.62.52.8
Current Account (billions USD) 0.13-0.31-0.54-0.79-0.80
Current Account (in % of GDP) 6.6-17.3e-31.9-44.4-42.5

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
American Dollar (USD) - Average Annual Exchange Rate For 1 MUR 0.030.030.030.030.03

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 39.3 16.3 44.4
Value Added (in % of GDP) 14.2 29.4 56.8
Value Added (Annual % Change) 2.5 103.0 3.1

Source: World Bank - Latest available data.

 

The Active Population in Figures

201820192020
Labour Force 530,711545,809560,164

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 67.21%67.45%67.49%
Men activity rate 72.47%72.70%72.73%
Women activity rate 61.82%62.07%62.11%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
44,7/100
World Rank:
170
Regional Rank:
38

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
3/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
71/180

Source: World Press Freedom Index, Reporters Without Borders

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Sources of General Economic Information

Main Online Newspapers and Portals
Timor-Leste News Sites
East Timor News
BBC Country Profile, East Timor
Al Jazeera, East Timor
Useful Resources
Ministry of Finance
Government of East Timor
Central Bank of Timor-Leste
 
 

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Latest Update: May 2022