The Timorese non-oil economy could contract almost 10% this year, in the less optimistic forecast of the World Bank report, released today, with a minimum decrease of around 7%.
“An economic recovery policy package has given some support to families and businesses in East Timor. Although this does not prevent the biggest recession since independence, the recent political transition is an opportunity to achieve much-needed structural reforms, ”said the institution, in the economic forecasts for East Asia and the Pacific (LAP).
Among the group of developing countries, and in either scenario, East Timor registers the third largest contraction in the region, below the Fiji Islands, where the economy is expected to fall by at least 21.7%, and Thailand, with a decrease of at least 8.3%.
In the report, East Timor is grouped in the developing countries of LAP, which include Cambodia, China, Indonesia, Laos, Malaysia, Mongolia, Myanmar, Papua New Guinea, Philippines, Thailand, Vietnam and the Pacific island countries.
Under the theme “From containment to recovery,” the World Bank (WB) report on the region noted that the effects of the covid-19 pandemic itself were compounded by “the economic impact of containment measures and the reverberations of the recession global”.
According to forecasts, the region as a whole is expected to register growth of only 0.9% this year, “the lowest rate since 1967”, a positive figure due to China, where the economy is expected to grow 2% , “Driven by public spending, strong exports and the low rate of new infections” of covid-19.
In the rest of the LAP, excluding China, the economy should contract by 3.5% this year, indicated the BM.
“A shock” from the pandemic that “is not only keeping people in poverty, but also creating a class of ‘new poor’,” he said.
“The number of people living in poverty in the region is expected to increase by 38 million in 2020 – including 33 million who would otherwise have escaped poverty, and another five million pushed into poverty – using a poverty line of $ 5.5 [4.7 euros] per person per day, ”he said.
It should be noted that this amount of poverty is above the minimum wage in East Timor, which, despite not being officially fixed, is around $ 115 (98.5 euros).
In the case of East Timor, the BM indicated the drop in revenues from the oil well Bayu Undan, a big drop in domestic demand, with imports falling 20%, a 7% reduction in public spending, 56% in spending on infrastructures and 16% in goods and services.
Without the amounts spent on responding to covid-19, public spending would have fallen by 27%, underlined the report, which noted a 3% increase in credit, with no additional effects on the default rate.
The projection is for declines in non-oil revenues “for the fourth consecutive year”, a drop of 4% in private consumption, with already low exports falling by half this year.
The BM’s forecasts pointed to a recovery of the economy of East Timor in 2021, with a growth of about 3%, a figure that contrasts with the average of 5% growth in the region, excluding China.
The BM underlined that the lack of a budget for this year and the impact of containment measures on the private sector conditioned the country’s economic behavior.
The report noted that East Timor, Myanmar and Cambodia are the only three countries in the region with a low risk of over-indebtedness.
In terms of health, the region has suffered less from the pandemic than other parts of the world, having applied a combination of “strict mobility restrictions, extensive testing-based strategies and information programs to encourage precautionary behavior”.
However, efforts to contain the spread “have led to a significant reduction in economic activity”, with regional production falling by an average of 4%, while in China the reduction was 1.8%, he noted.
At the same time, attempts to relaunch domestic economic activity were not enough, because the region “is heavily dependent on the rest of the world”, being conditioned especially in sectors such as tourism.
“Although short-term capital has returned to the region, global uncertainty continues to inhibit domestic and foreign investment. The ability of financially pressured governments to stimulate economies is also limited, ”he said.
A situation that should be reversed in 2021, when a 5.1% growth is expected in the region, with China growing 7.9%, “based on the assumption of the continued recovery and normalization of activity in the main economies, associated the possible arrival of a vaccine ”, he said.
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