Oil and Vaccine Aid from China and Japan Improve Timor-Leste Economic Prospects


Developments in the oil sector and covid-19 vaccine aid from China and Japan will improve Timor-Leste´s economic prospects, according to the Economist Intelligence Unit (EIU).

“The arrival of large supplies of vaccines from the World Health Organisation’s COVAX Facility and China has led us to revise our forecast for widespread vaccination, from 2025 to 2023”, the EIU says in its most recent report on Timor.

“A renewed surge in coronavirus cases began in late July and has yet to be brought fully under control. The vaccination programme is under way, with vaccines being suppled by China and Japan”, it adds.

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Following the publication of the revised 2021 budget, the EIU revised its estimates of revenue and expenditure and expects increases of more than 30%. A fall in spending in 2022 is now expected.

GDP growth will expand by 4.5% in 2022, “as a well-drilling campaign sees oil and gas production increase from the Bayu-Undan field”, the EIU says. “The positive effect of the campaign will spill over into 2023. However, recurrent outbreaks of Covid-19 remain a downside risk to the EIU’s forecasts”.

According to the report, the government will attempt to rein in spending in 2022-23 after a large increase during the pandemic. Major projects including a port development and airport upgrade will be completed in the forecast period.

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“We retain our estimate that GDP growth of 4% will be recorded in 2021, ticking up to 4.5% in 2022. This reflects the receding impact of the coronavirus pandemic, and the drilling of new wells in the Bayu-Undan gasfield, which will support oil-sector GDP”, the EIU says.

On September 30th the General Directorate of Statistics published national-accounts data, which showed that Timor-Leste’s real GDP rose by 10.4% in 2020, although this figure was inflated by a statistical adjustment. Non-oil GDP declined by 8.6%.

As a surge in coronavirus cases since late July this year led to a temporary lockdown (now lifted) imposed on the capital, Dili, with restrictions on movements between districts remaining in place, “it seems likely that private consumption spending will remain subdued for much of 2021”, the EIU says. But the pace in the oil sector “will offset this to some extent, allowing a reasonably strong pace of overall GDP growth to be recorded”.


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