Economics & Development

GDP growth slowed to 2.1percent in 2025, down from 3.2 percent a year earlier, as momentum in private consumption and investment softened amid elevated inflation and political uncertainty. Industrial weakness persists. General elections could keep the fiscal deficit elevated in the near term, although public debt remains moderate. Growth is projected to gradually recover toward potential, reaching 3.2 percent by 2028.

Timor-Leste is entering a new and potentially transformative economic chapter. Oil and gas production from the offshore Bayu Undan field has ended and the country now faces the task of building a durable foundation for prosperity - one driven by productive firms, exports, and a skilled workforce. The Tasi Mane project, including the development of a liquefied natural gas plant, remains a strategic national priority with the potential to anchor long-term revenues while strengthening energy security. Its fiscal contribution is, however, unlikely to materialize in the medium term. This edition of the Timor-Leste Economic Report argues that the country stands at a critical moment. Timor-Leste joined the Association of Southeast Asian Nations (ASEAN) in 2025, following the country’s accession to the World Trade Organization (WTO) in 2024, providing a timely platform to accelerate its transition from an oil-dependent economy to one driven by productive firms, exports, and skills. International experience shows that such transitions can succeed when regional integration drives domestic reforms. By treating ASEAN membership as a reform platform now, not later, Timor-Leste can build a more competitive, job-creating economy, and secure its long-term prosperity.