Dili, Sept. 3, 2026 (Lusa) - The economic outlook for Timor-Leste remains favourable, with non-oil Gross Domestic Product (GDP) growth of 5% forecast for 2026, according to the Central Bank of Timor-Leste's (BCTL) medium-term economic review.
«Real non-oil GDP growth is forecast to rise from 4.5% in 2025 to 5% in 2026, supported by public expenditure, household consumption and a gradual recovery in private investment,» the review, published on Wednesday, states.
The document notes that public investment in infrastructure remains an important source of domestic demand, but that «limited domestic production capacity and absorption constraints continue to limit the supply response».
«High dependence on imports further reduces the domestic value added generated by the expansion in demand and contributes to persistent external imbalances,» the Timorese central bank emphasises.
As regards inflation, the outlook indicates that it is expected to stand at 1% in 2026, but could rise due to risks of rising transport and energy costs.
«Given the high dependence on imports and the full dollarisation of the economy, shocks to external prices may be passed on to domestic prices, reinforcing the importance of maintaining price stability and strengthening domestic productive capacity,» the document states.
The document highlights that fiscal policy continues to support economic activity, but that the end of production at Bayu-Undan has «significantly altered the fiscal and external environment».
«The decline in oil revenues makes it urgent to boost domestic revenue mobilisation, improve the efficiency of public spending and maintain prudent management of the Petroleum Fund's resources,» warns the BCTL, which recommends greater prioritisation and efficiency in public investment.
The BCTL's review also highlights that the current account deficit rose to $374.1 million (€322.8 million) in the first half of the year, compared with the deficit of $309 million (€266.7 million) recorded in the same period of 2025.
«Imports remained high, whilst non-oil exports, despite strong growth, remained low relative to import demand,» it explains.
According to the BCTL, the short-term outlook continues to be underpinned by domestic demand and low inflation, but vulnerabilities remain significant.
«High dependence on imports, limited productive capacity, weak export diversification, declining oil revenues and limited financial intermediation constrain the economy's ability to adjust,» the review states.
In the document, the BCTL makes a number of recommendations, notably greater fiscal prudence, reforms to boost productivity, mobilisation of domestic revenue, diversification of exports and the deepening of financial intermediation.
«These reforms are essential to strengthen external resilience, support private-sector-led growth and preserve wealth for future generations,» adds the Timorese central bank.
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