Monetary and Banking

Monetary and Banking

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The Economic and Statistics of the Central Bank of Timor-Leste deals with:

  • Balance of Payments statistics
  • Monetary and Financial Statistics
  • Gross Domestic Product
  • Government Finance Statistics
  • Price Statistics
  • International Trade Statistics
  • Other related statistics
  • Economic analysis and research

It is engaged mainly in promoting the production of harmonized and quality economic statistics in Timor-Leste by applying:

  • International statistical standards 
  • Providing services in the collection, compilation, analysis, and dissemination of economic statistics
  • Conducting research to improve the production and use of economic statistics
  • Serving as a house of data base for economic analysis by data users
Due to the important relationship between Timor-Leste economic development and the rest of the world, timely, reliable, and comprehensive balance of payments statistics based on an appropriate and analytically oriented methodology are an indispensable tool for economic analysis and policy making.

Balance of Payment

The BCTL has developed a methodological compilation of balance of payments (BOP) statistics and International Investment Position (IIP) statistics for Timor-Leste based on the Balance of Payment manual of the IMF, BPM manual. To serve as a guide for the compilation practice a metadata has been developed.

Monetary and Financial Statistics

Monetary and financial statistics of Timor-Leste consist of a comprehensive set of stock and flow data on the financial and nonfinancial assets and liabilities of all sector of the economy of Timor-Leste. The compilation guide for monetary and financial statistics of Timor-Leste is based on the monetary and financial statistics manual of the IMF.
Financial institutions supervised by the BCTL are required to report the balance sheet and income statements to the BCTL on a monthly basis. This information will be used as the basis for compiling the monetary and financial statistics of Timor-Leste. The monetary statistics are very closely linked to the banking statistics.
They form an essential input for central bank monetary policy. The statistics concern the monetary aggregates which are calculated in accordance with definitions adopted by the BCTL.

Gross Domestic Product (GDP)

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. The GDP of Timor-Leste is calculated on an annual basis. GDP includes all private and public consumption, investments and exports minus imports that occur within the territory of Timor-Leste.

In a simple way, GDP of Timor-Leste is a broad measurement of Timor-Leste’s overall economic activity.

Formula to calculate Gross Domestic Product  
GDP = C + G + I + NX  
Where: C is equal to all private consumption, or consumer spending, in Timor-Leste's economy, G is the sum of government spending, I is the sum of all the country's investment, including businesses capital expenditures and NX is the nation's total net exports, calculated as total exports minus total imports (NX = Exports - Imports).  


The Government Finance Statistics (GFS)


The Government Finance Statistics (GFS) of Timor-Leste release by the BCTL show the economic activities of government, basically the government budget execution, including:
  • Government total revenue
  • Government total expenditure
  • Government balance, i.e. surplus (+)/deficit (-)


Inflation

Inflation is an increase of the general level of prices during a certain period of time, usually one year, one quarter or one month.
The inflation is usually measuring the certain variation of the call General Index of Prices (CPI) in the considered period. CPI is built starting from inquiries to the expenses of the families (that allows to determine the relative weight of each type of goods:

Examples:

  • Food
  • Education
  • Transports
  • Etc...
In the structure of medium consumption of the Timorese families and of the information collected monthly at stores, markets and similar on the prices verified in the market of a very vast group of goods and services.

The revised Timor-Leste’s CPI present the new weights of the groups of products as follows:

Product List  
Product Per Cent
Foods 64.3% (of which 17.2 are cereals, particularly the rice)
Alcohol and Tobacco 4,9%
Clothing and Footwear 5,9%
Housing 5.7%
Household Furnishing 4.2%
Health 0.8%
Transports 6.4%
Communications 2.3%
Recreation and Culture 3,3%
Education 2.3%

International Trade Statistics

The National Directorate of Statistics, using as base information that is supplied by the Customs of Timor-Leste, publishes information regularly on the external trade of our country.

Customs record the separate data for merchandise and non-merchandise import, and export and re-export.

Merchandise imports are products that refer to the provisioning of tax, and non-merchandise imports are the one that exempt for taxes. Re-export is the equipment that previously imports, by international agencies, and returned back to the country of origin. The official currency of Timor-Leste is the United States dollar. All payments and transactions within the country must be in official currency.

This new CPI has as base the medium prices of December 2012, the one that the index 100 was attributed, and is collected the prices in monthly basis both for Dili and for Timor-Leste, in some capital cities of district, creating a CPI-Dili and a CPI-national one.
Given that the data of Dili are more entrusted that the one of the rest of the country, the inflation rate usually presented is the one verified in Dili. Timor-Leste Customs record all import and export of goods and services enter or living the country.
The National Directorate of Statistics, using as base information that is supplied by the Customs of Timor-Leste, publishes information regularly on the external trade of our country.
Customs record the separate data for merchandise and non-merchandise import, and export and re-export.
Merchandise imports are products that refer to the provisioning of tax, and non-merchandise imports are the one that exempt for taxes. Re-export is the equipment that previously imports, by international agencies, and returned back to the country of origin.
The official currency of Timor-Leste is the United States dollar. All payments and transactions within the country must be in official currency.

Exchange Rate

Commercial banks in Timor-Leste establish foreign exchange rates according with their own criteria; the rates are only for information purposes. The BCTL publishes this information from international sources as a public information service. Real exchange rates are nominal exchange rates corrected somehow by the effect of price movements (increase or decrease) in the economy. The real exchange rate provides information on the degree of competitiveness of one country when compared to another.
The indicator to measure exchange rate changes is the Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER). 

Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER)

NEER
The NEER is a weighted average of major bilateral nominal exchange rates, with weights based on the trade shares reflecting the relative importance of each currency in the effective exchange rate basket.
The NEER for each time period t is defined as the weighted sum of the bilateral nominal exchange rates, with weights defined as share of external trade of each trade partner on total.
 
Where:
 Exchange rates of country/currency i against the US dollar
 Weights attached to the country/ currency i in the index

REER
The REER is obtained by adjusting the NEER for inflation differentials with the countries whose currencies are included in the basket. As the inflation rate in each country is assumed to broadly indicate the trends in domestic cost of production, the REER is expected to reflect foreign competitiveness of domestic products. The main focus of the REER is on the trade balance, particularly on the exchange rate induced changes in trade flows. A trend appreciation of the real effective exchange rate is considered unfavourable for the growth of exports and as it favours imports from competing countries. The REER is the weighted sum of bilateral real exchange rates, with weights given by the share of each trading partner total:

 

 j = Timor-Leste , i=partner


The NEER and REER based on trade composition of Timor-Leste with 8 trading partner countries are computed on a regular basis by the Central Bank (BCTL). Selection of countries in the basket is based on bilateral trade shares and the importance in terms of competitiveness of those countries import to Timor-Leste in the international market.

The weighted value is calculated on basis of geometric average of Timor-Leste bilateral trade with each of the countries.

Composition of 8 Trading Partners (Per Cent)  
Partner Per Cent
Indonesia 45%
Australia 9%
Singapore 18%
Japan 4%
Vietnam 7%
Thailand 3%
Malaysia 9%
Portugal 5%
The composition may change as after 5 years is reweighted.