East Timor: Country has lost at least seven years of economic growth – PM

East Timor has lost at least seven years of growth, with national GDP in 2020 falling to 2013 levels, exacerbating the vulnerability of households, the situation of the private sector and labour insecurity, the East Timorese Prime Minister said on Wednesday.

Taur Matan Ruak said in parliament: “All this has led to the worsening of the situation of vulnerability of Timorese families, in the face of reduced employment and labour income, despite the various support measures adopted by this Government”.

For this year, the Government has revised the growth forecast downwards, from around 2% to 1.6%, anticipating a growth of 2.1% in 2022.

At the start of the debate on the State Budget (GSB) proposal for 2022, the head of the Government said that the growth recorded until 2017 was interrupted, due to the political crisis in the country and then the Covid-19 pandemic.

“The weight of the informal sector in the economy has left many people without protection or access to Social Security, especially small sole proprietors or self-employed,” he stressed.

Taur Matan Ruak said the private sector “was especially affected due to dependence on public tenders and delays in payments by the state”, as well as a drop in household consumption.

“Many already previously decapitalised companies saw their situation worsen. Particularly hard hit were the micro, small and medium-sized enterprises linked to the tourism and catering sector, due to the closure of borders, confinement and the drastic reduction in the number of tourists,” he noted.

Particularly affected was the still small tourism sector, which fell by more than 80 per cent.

He reported on measures adopted since the beginning of the pandemic to support businesses, families and workers, both in the formal and informal sector, including “a first support to the unemployed, which could be the genesis of a future universal unemployment benefit.

Still, he said, “it is necessary to continue helping companies, particularly those in the tourism sector, not only to ensure the recovery of the sector, but also to prevent the closure of more companies and dismissal of workers.”

It is “urgent to invest in social protection, which is often seen as a non-productive expense, but more than an expense, it represents an investment in people, allowing to ensure dignity and resilience against risks throughout life and against crises” such as the pandemic.

“The year 2021 was the year of consolidation of the Social Security System. After the constitution of the Social Security Reserve Fund (FRSS) was approved, in 2021 the necessary steps were taken to operationalise the management of the Fund, including the preparation of the investment policy, the preparation of the reference portfolio, and the negotiation of the operational management agreement is underway,” he said.

Among other aspects he highlighted new measures to extend the contributory regime, promote equal treatment to all workers, fair pensions for civil servants still covered by the previous regime and approve a minimum pension.

He also added the construction of the financial computer system of social security, which should be concluded in the first quarter of 2022, and the creation and operation of the Service of Verification of Disabilities, with more decentralised services and more staff at the National Institute of Social Security (INSS).

The State Budget for 2022 is worth US$1.842.5 billion (1.59 billion euros), including government spending and the social security budget, a 15.7 percent drop from the 2021 public accounts.