Dili, Sept. 23, 2026 (Lusa) - The Asian Development Bank (ADB) has raised its economic forecasts for Timor-Leste, projecting 4% growth in 2026 and 4.1% in 2027, according to the Asia and Pacific Economic Outlook report released on Wednesday.
In its July forecasts, the ADB had projected growth of 3.8% in 2026 and 4% in 2027.
«The economic growth forecast for 2026 has been revised upwards, supported by increased public expenditure and robust domestic demand against a backdrop of low inflation,» the report said.
The document also indicates that public spending, with the approval of an amending State Budget due to the conflict in the Middle East, credit to the private sector and accession to the Association of Southeast Asian Nations (ASEAN) are underpinning consumption and investment.
«Credit growth, supported by a more favourable legal framework and a more robust financial infrastructure, is expected to strengthen investment's contribution to growth,» the ADB noted.
According to the financial institution, accession to ASEAN has attracted new investors and tourists and increased visitor mobility.
The amended State Budget, approved to keep inflation low, bolster fuel and rice reserves, and support the most vulnerable groups and certain institutions, is also expected, according to the ADB, to «slightly increase the contribution of public consumption to economic growth».
These measures have also contributed to price stability, keeping inflation below forecasts.
«Despite a gradual rise in inflation for tradable and non-tradable goods, average inflation stood at 0.7% in July 2026, whilst food inflation reached 1.5%, just 0.2 and 0.3 percentage points above the levels recorded in December 2025, respectively,» the ADB explained.
Given persistent low inflation and government support to mitigate geopolitical impacts, the ADB notes that inflation forecasts have been revised downward from the July 2026 projections to 1 per cent in 2026 and 1.8% in 2027.
The ADB notes that risk factors remain that could challenge the economic outlook, including disruptions to fuel supplies and rising import prices due to the conflict in the Middle East, as well as more severe impacts from the El Niño phenomenon.
The World Meteorological Organisation warned in early September that El Niño is intensifying and is expected to reach ‘very strong' intensity, with a probability ‘close to 100%' of lasting until February 2027.
El Niño is a natural phenomenon that recurs every two to seven years. Surface waters in the central and eastern equatorial Pacific begin to warm in spring, leading to major changes in wind, pressure and rainfall patterns around the world in the following months.
MSE/ADB // ADB.
Lusa
