Timor-Leste's Economy to Grow This Year but Inflation a Threat - ADB Report

DILI, TIMOR-LESTE (18 July 2011) - Timor-Leste’s economy should grow by 10% this year, supported by robust government spending, although high levels of inflation will need to be carefully managed, says the Asian Development Bank’s (ADB) Pacific Economic Monitor released today. The report, which reviews the performances of the 14 economies of the Pacific three times a year, forecasts average gross domestic product (GDP) growth of 6.4% this year, and 5.5% in 2012. The expansion will be driven by strong growth of 8.5% in PNG this year, and strong performances by the two other natural resource exporting economies, the Solomon Islands and Timor-Leste. The other Pacific Islands are expected to post much lower average GDP growth of 1.5% in 2011 and 1.9% the following year. “Timor-Leste can sustain an internationally high rate of economic growth under sound economic management and favorable external conditions,” said Craig Sugden, ADB Resident Representative in Dili. “The private sector will need to play an increasingly important role in helping it remain one of the fastest growing economies in emerging Asia.” The report notes that projected inflation of 9.5% this year largely reflects the higher costs of imports, with the rate likely to pull back as global demand and commodity prices stabilize in 2012. Until then, policymakers will need to closely watch and manage price pressures.  The latest issue of the monitor also reviews Timor-Leste’s just released Strategic Development Plan 2011-2030. The plan lays out a vision and steps for driving high growth rates and eradicating extreme poverty by 2030. Since ADB began operations in Timor-Leste in 1999, it has received six grants from the Trust Fund for East Timor totaling $52.8 million, three Asian Development Fund (ADF) grants of a total $62.0 million, and 31 technical assistance (TA) funds worth $29.11 million. Currently, two ADF grants of $52.0 million and six TA projects worth $18.4 million are active. One of ADB’s initiatives has been helping the Institute of Microfinance Timor-Leste become the country’s first locally-owned commercial bank to provide loans to individuals and small businesses in both urban and rural areas. It now has 10 branches across the country and has helped boost jobs and local entrepreneurship, with 40% of its loans going to women. ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it is owned by 67 members -- 48 from the region. In 2010, ADB approvals, including cofinancing, totaled $17.51 billion. In addition, ADB's ongoing Trade Finance Program supported $2.8 billion in trade.

http://www.adb.org/documents/news/pacific/pac-201113-pem-timor-leste.asp?p=timmain