09/30/2020, 12.50
EAST TIMOR
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Support for workers and businesses to overcome COVID-19 emergency

by Mathias Hariyadi

The government wants to bring revenue levels back to pre-pandemic levels within two years. GDP is expected to drop by 6 per cent this year. Recovery will focus on human capital through investments in welfare and education. Opinions differ over the revival of East Timor’s economy.

Dili (AsiaNews) – Direct support for workers and businesses to bring revenue levels back to pre-pandemic levels within two years is the economic strategy pursued by the government of East Timor (Timor Leste) to overcome the COVID-19 emergency.

The coronavirus crisis has accentuated East Timor’s economic difficulties, already marked by a deep political crisis in the last three years.

The health impact of the pandemic has been limited with only 28 reported cases and no deaths, but the Central Bank of Timor-Leste expects a 6% contraction in GDP this year.

Although government action in the early stages of the pandemic limited unemployment, the cut in working hours also reduced disposable income for wage workers.

Many companies have been forced to close because of the end of public aid and the drop in domestic demand due to the lockdown.

Tourism, hotels and restaurants are the most affected sectors. Self-employed workers and businesses that rely on foreign workers, who went home at the outbreak of the crisis, are also in difficulty.

After stabilising the labour market, the authorities plan to double public spending over the next five years to solve the country's many structural problems.

East Timor is still a subsistence economy, with large pockets of poverty, and is struggling to modernise.

The government, which depends on the proceeds from gas and oil sales as well as international aid, has too big a share of the national economy.

Inequality in income distribution is another serious issue, and an efficient social welfare has still not been set up.

The government wants to create new jobs, consolidate public investments in education, health, and housing, and build a real social safety net. It also plans to transform the economy by promoting human capital.

However, forecasts for the East Timorese economy are conflicting. About 38 million more people are expected to live in poverty this year in the Asia-Pacific region, this according to a World Bank report published yesterday. East Timor is included in the study.

By contrast, Fitch Ratings Inc., a credit rating agency, expects East Timor to experience a healthy recovery, with economic growth between 5 and 5.5 per cent.

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