Dili, June 10, 2021 – Economic activity in Timor-Leste has been severely weakened by the impact of a recent COVID-19 outbreak and the aftermath of Cyclone Seroja, according to the World Bank’s latest economic report for Timor-Leste released today. However, GDP is expected to continue growing 1.8 percent in 2021, supported by stronger public spending.
The report, Economic report Timor-Leste: Breaking new ground, Investigates recent developments in the country and finds that COVID-19 is spreading rapidly despite early success in containing the virus. In addition to these challenges, there are the consequences of the Seroja cyclone, which caused floods, landslides, significant human losses and economic damage to Timor-Leste in April 2021. Together, these health and humanitarian emergencies are undermining the country’s economic recovery in 2021, although the recent adoption of a revised budget could bring some relief, the report said.
“COVID-19 severely disrupted economic activity in 2020 and 2021, compounded by the recent flash floods,” said, ” Pedro Martins, World Bank Senior Country Economist for Timor-Leste. “The economy is expected to recover in the medium term, but COVID-19 remains the main risk to the economic outlook as it may require longer containment measures to avoid large human losses. The rapid introduction of vaccinations is more important than ever today. “
It is estimated that the economy contracted about 7 percent in 2020, while public spending fell by 9 percent. Capital expenditures were almost halved, but public transfers to support households increased. The report also notes that domestic revenues suffered from lower economic activity, while the budget deficit fell to 26 percent of GDP – mainly due to lower spending. Imports fell 19 percent, mainly due to a slowdown in construction and travel services. Exports have almost halved due to limited travel services and lower coffee revenues.
“The first half of 2021 saw devastating floods and an outbreak of COVID-19 – which the country had been so successful in suppressing until recently. These double disasters threaten to undo hard-won achievements in poverty reduction and economic stability, ”said Bernard Harborne, Country Representative for Timor-Leste. “As a long-term partner, the World Bank stands by the people in Timor-Leste. We are ready to provide short term support and develop long term solutions to protect and invest in people during and after the pandemic. This report provides a useful snapshot of the current economic climate and key insights into building a stronger health system.
The Timor-Leste Economic Report also has a special focus on building a stronger health system in the country and offers recommendations. Despite good progress on many health indicators, significant health challenges remain. COVID-19 and the recent floods have both exposed and exacerbated the underlying weaknesses in Timor-Leste’s health system. Persistent challenges in this area include high rates of stunted growth in children, infectious diseases, and poor maternal and child health outcomes. Key interventions to improve health service delivery include increasing investment in primary health care and improving the skill mix and skills of health workers. Investing in emergency preparedness is also critical to effectively managing and responding to future crises.