The World Bank on Thursday found that the Timorese economy is showing the first signs of recovery, with GDP forecast to grow by 1.9% this year, after the setback due to the impact of the pandemic and floods
“Uncertainties remain high as Covid-19 continues to evolve locally and globally. A rapid expansion of vaccination coverage is key to containing the pandemic and achieving economic recovery,” the World Bank notes.
In its latest report, released today, the World Bank notes that the pandemic situation in the country has improved, with fewer active cases and vaccination accelerating, with more than 57 per cent of the population over 18 years old already vaccinated and 71 per cent with at least one dose.
Despite this, it notes, vaccination coverage is not uniform nationwide, with some municipalities having only 30% vaccinated.
The World Bank report notes that the Government collected 11.3% less domestic non-oil revenue during the first half of this year compared to the same period in 2020.
Public spending, one of the main drivers of the economy, grew by 20.3 per cent, but “capital spending remained relatively low”.
One of the new elements in the economy is inflation which reached 3.6% in the second quarter, the highest in eight years, driven in particular by rising prices of food, beverages, alcohol and tobacco.
Credit to the private sector more than doubled, “driven in particular by loans to households,” the institution noted.
In its forecast, the World Bank notes that non-oil GDP shrank by 8.6% in 2020, but is expected to recover 1.6% this year, partly due to base effects and “Covid-19 related fiscal expansion”.
Looking ahead to next year, the World Bank anticipates recurrent state spending to grow by 24%, with “sustainable sources of revenue continuing to be 40% lower than current spending”.
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Globally, the World Bank recalls that the crisis caused by the pandemic “emerged in what was already a period of low growth, indicating deep structural problems”.
In this framework it considers that “delays in implementing a structural reform agenda may affect growth, competitiveness and employment”.
Increasing tax revenues has to be part of that agenda.