Growth is expected to remain tepid over the coming years. The economy shrank 4.6% p.a. in 2017 with growth rising to 0.8% in 2018 and forecast at 5% in 2019. The former government had its 2018 budget vetoed by the opposition and smaller parties. This weighed heavily on fiscal spending, a big driver of the non-oil economy. Despite the successful conclusion of the May 2018 elections, the growth outlook will be constrained by declining oil and gas production.
Growth is forecast to improve over the coming years driven by robust public investment. Though weaker oil and gas production from the current fields will drag on the outlook. Elevated public investment is being funded by Timor-Leste petroleum fund, currently equivalent to 540% of GDP, but without new sources of public revenues the fund could diminish by 2037.