Dili, April 16, 2025 (Lusa) - Timor-Leste's economy grew 4.5% in 2025, the highest rate since 2014, but remains dependent on imports and public spending, a World Bank economic report said on Wednesday.
"Economic performance strengthened in 2025, with non-oil Gross Domestic Product (GDP) growth of 4.5%, the highest rate since 2014, supported by political stability, the consolidation of major infrastructure investments and the first signs of an expanding private sector," the report says.
However, the report, titled "Raising the Bar: How ASEAN (Association of Southeast Asian Nations) Accession Can Support Timor-Leste's Economic Transformation," notes the economy lacks diversification and growth is based on imports and heavy public spending.
"Production gains focus on services and construction, while agriculture and manufacturing remain weak" and "much of the demand boost flows abroad through imports," the document added.
The report also notes that private investment links to public contracts and the labour force participation rate is only 30.5%, the lowest in the East Asia and Pacific region.
The goods trade deficit reached 47% of non-oil GDP in 2025, with imports worth $960 million and exports of only $41 million.
Oil revenues fell to $36 million following the closure of the Bayu-Undan field (a major gas-condensate producer).
"This shows the country’s extremely limited export diversification. Tourism revenues and remittances, equivalent to about 11% of GDP, provided some support but remain too low to close the trade deficit," the document states.
The budget deficit increased to 49% of GDP, with total spending reaching 93% of GDP, while public revenue financed less than half of total public expenditure.
The report says transfers to state-owned companies became a "major fiscal burden" and reached 12% of total expenditure, more than education and health, "representing a growing fiscal risk."
"Together, these dynamics point to a fragile economic cycle. Government-led growth increases imports, imports increase the external deficit, and the Petroleum Fund (a sovereign wealth fund using oil and gas wealth) finances the deficit," which allows high spending levels, the World Bank says.
MSE/LYT // AYLS
Lusa
