The Central Bank of East Timor (BCTL) expects the Timorese economy to have positive growth this year, but lower than the 4% registered last year, indicates the annual report of the Timorese regulatory institution released today.
For 2023, the central bank has projected quite positive economic growth mainly due to an expected slowdown in the contribution of domestic demand growth this year “compared to that observed in 2022,” said the institution’s governor, Abraão Vasconselos, in the introductory note to the 2022 report.
“Consequently, it is important to emphasize the positive and greater contribution that the external sector will have on economic growth in the current year,” he stressed.
The BCTL noted that last year’s 4% increase in the economy, a 1.1 percentage point increase from 2021, was largely due to the “increase in public spending by US$299 million, and follows the pace of increase in public spending seen in 2021 (US$306 million).”
The BCTL warned, however, “of the risks that successive expansion of fiscal policy may have on the sustainability of East Timor’s public accounts and, therefore, undermine the more robust economic development of the private sector of the economy.”
Regarding the fiscal policy, Abraão de Vasconselos mentioned the “significant increase in expenditure and the public deficit, due mainly to the current expenditure growth (US$236 million), in line with the increase in the respective budget.
“For 2023, the BCTL expects a further increase in expenditure, and the public budget deficit, mostly explained by the recovery of the ability to execute investment in infrastructure and buildings, so budgetary policy will continue to support the economic recovery of the 2020 pandemic crisis”, he added.
East Timor did not escape the global inflationary trends, with the average inflation rate standing at 7.0% last year, above 3.8% and 0.5% in 2021 and 2020, respectively.
An acceleration in prices for which “contributed to the global production and logistical constraints in 2022, as well as the emergence of war in Ukraine that put pressure on food and energy commodities.”
East Timor registered a significant increase in the external current account deficit in 2022, registering a negative value of US$950 million, explained essentially by sharp growth in imports of goods and services.
Even though oil revenues have continued to fall, “they remain a factor in mitigating the impact of the high trade deficit of the Timorese economy”.
Despite the challenges, the country’s financial sector “continued to remain robust and to register high dynamism in terms of the growth of its activity, assets, and funds raised, with increases in deposits and credits,” he highlighted.
In 2022, the BCTL’s accounts recorded a positive net result of about US$4.8 million, “generated, essentially by the interest received from the applications of the BCTL’s reserves and the income from the management fees of the Petroleum Fund.”
Among the initiatives undertaken by the BCTL, the “Digital Field” initiative to promote knowledge and the use of technological tools for financial activities in rural areas of the country, stands out.
In terms of the payment system in the country, the implementation of additional features in the R-TiMOR system, allowing the payment of taxes in ATMs or through electronic money wallets (‘e-wallet’), is highlighted.
On the other hand, the implementation of the interconnection project “of the P24 network with an Indonesian payment network under the responsibility of the BCTL” to enable the use of Timorese bank cards in banks in Indonesia, he indicated.
Banco Nacional Ultramarino (BNU), in collaboration with Mastercard, BCTL, and the service provider, has achieved 92% development for using Mastercard in East Timor, an operation they hope to implement shortly.
Completing this project will enable international Mastercard cardholders to perform transactions at BNU-Timor P24 ATMs and POS (points of sale).
With information from Lusa
News East Timor, English news East Timor, Timorese economy
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