Strong performance in the oil sector has boosted Timor-Leste’s 2021 GDP growth forecast from 2.5 to 4 per cent, according to the Economist Intelligence Unit (EIU).
“Strong oil production volumes in early 2021 have prompted us to raise our forecast for GDP growth in 2021,” the EIU’s most recent report on the Timorese economy stated.
“An infill drilling campaign looks likely to boost oil production from the third quarter of this year.”
In view of a fall in oil production volumes in 2020 and the publication of preliminary data on non-oil GDP showing public and private investment down by 49.8 per cent and 38.8 per cent respectively, the EIU has revised down its GDP growth estimate for 2020, from 25 per cent to 22 per cent. The unusually high figures were due to a change in official economic output estimations.
Growth is expected to accelerate to 4.5 per cent in 2022, as the state of emergency is lifted and agriculture recovers from flash flooding in 2021.
“Government spending will remain largely financed by drawdowns on the Petroleum Fund, which is a vehicle for the investment of petroleum wealth). Concerns remain about the longer-term sustainability of this approach, but the PF is currently well capitalised,” the EIU report stated.
Cooperation with Australia over the forecast period will be vital to ensure that Timor-Leste continues to receive petroleum-related income from maritime resources, the report added.