Dili, April 16, 2026 (Lusa) – Timor-Leste’s economy is expected to grow by 4.1% in 2026, though this outlook remains insufficient to generate employment, increase productivity, or expand exports, according to a World Bank report released on Thursday.

World Bank forecasts indicate the economy will maintain growth in 2026, driven by household consumption and high government spending, following a 4.5% growth in 2025, the highest since 2014.

"Timor-Leste’s economic outlook remains stable in the near term but increasingly fragile under current policies," says the report, titled "Timor-Leste Economic Report: Levelling Up - How ASEAN Membership Can Support Timor-Leste’s Economic Transformation."

The World Bank predicts that Gross Domestic Product (GDP) will grow 4.1% in 2026, moderating to 4% in the medium term. This rate is "enough to preserve stability in the short term but insufficient to generate the levels of job creation, productivity gains, and export expansion."

Expenditure on salaries and transfers accounts for 81% of the state budget. According to the report, these costs will not decrease before the election period scheduled for 2027 and 2028. Capital investments exhibit low execution rates, limiting their impact on economic growth.

Private investment should remain concentrated in construction, retail, and hospitality due to limited access to financing. The World Bank predicts inflation will rise to 2.3% in 2026, driven by global price increases resulting from the conflict in the Middle East. However, the report expects private consumption to remain resilient, supported by public spending.

"Private investment is likely to remain concentrated in construction, retail, and hospitality, constrained by limited access to finance, weak land tenure security, and underdeveloped logistics," the document said.

MSE/RYOL // ADB.

Lusa