Population 5.614 million
GDP 33.466 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
9.4 |
11.1 |
7 |
7 |
|
Inflation (yearly average) (%)
|
10 |
12 |
10.5 |
11 |
|
Budget balance (% GDP)
|
2.3 |
0.5 |
1.4 |
2 |
|
Current account balance (% GDP)
|
-8 |
4.8 |
6 |
6.2 |
|
Public debt (% GDP)
|
11.8 |
20.5 |
26.8 |
27 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Fourth largest natural gas reserves in the world
- Diversification of hydrocarbon export channels to China and Iran
- Large foreign exchange reserves
- Low debt ratios
WEAKNESSES
- Small enclosed economy
- Limited economic diversification
- Underdeveloped banking sector
- State interventionism and difficult business climate
Risk assessment
Increased and more geographically diversified gas exports
Turkmenistan posted strong growth in 2012, driven by private consumption and public investment. The hydrocarbon sector continues to dominate. Redirecting gas exports to China and India has afforded the country relative protection from the worsening economy in Europe, which is affecting Russian demand. Turkmenistan nevertheless is still very exposed to a fall in hydrocarbon prices. The construction (sustained by large public investment projects), transport and communications sectors have grown strongly. FDI inflows, mainly from China, in the energy sector, held up and are expected to continue to grow in response to the country’s strong needs to develop its infrastructure for hydrocarbon production as well as transport. Inflation has slowed but remains high due to the combined effect of demand pressure stimulated by the government’s expansionary fiscal policy and higher food prices.
Solid public and external accounts
The State budget is in surplus in 2012 and will remain so in 2013, thanks high gas revenues. Spending continues to rise under the 2011-2030 National Economic and Social Development Programme, aimed at developing infrastructure, especially but not only, in the hydrocarbon sector. In October 2012, the President committed to implementing a five-year public investment plan aimed at developing the chemicals and light industry sectors to boost the country’s economic diversification.
The improved quality of life for the population promised by the government will come about from, among other things, higher wages and pensions. The assets of the Stabilisation Fund, into which all budget surpluses recorded since 2008 have been paid, provides the country with room for manoeuvre, at least in the short term, if a fall in raw materials prices hits fiscal revenues. Public sector debt remains contained.
The current account surplus, essentially deriving from gas export income, thanks to an increase in export volumes, especially to China and to a lesser extent Iran, and sustained high oil prices. Exports of cotton also represent a key source of income but disappointing harvests mean a smaller contribution in 2012. Imports of capital goods are very high linked to the high level of public investment. Foodstuffs also form a substantial proportion of imports due to weak agricultural productivity.
Turkmenistan still has enough foreign exchange reserves to maintain the manat’s fixed exchantge rate against the dollar.
Tensions with Azerbaijan, state interventionism and persistent governance shortcomings
There are tensions between Turkmenistan and Azerbaijan over the rights to the hydrocarbon deposits in the Caspian Sea as a large part of offshore oil reserves and gas reserves are situated in a conflict zone. These tensions are delaying exploitation of these deposits as well as the pipeline project intended to supply Turkmen gas to Europe via the Caspian Sea.
President Gurbanguly Berdymukhamedov was re-elected in 2012 in elections criticised by the international community for their lack of transparency. The government was returned unchanged demonstrating a desire to consider the same policies. Despite dropping the personality cult pursued under the former president (Saparmurat Niazov), the regime remains characterised by high concentration of power in the hands of the executive. A second party (Union of Industrialists and Entrepreneurs) was established in August 2012 alongside the presidential party (Democratic Party), under a law passed in January authorising the creation of political parties. The arrival of this new party is unlikely to affect the current stranglehold on power over the country’s economic, political and social life. As the private sector represents less than 40% of GDP, prices remain controlled and various restrictions limit access to foreign exchange. The State also owns practically all the banks and controls the allocation of credit, about 20% of which is granted directly by the Central Bank. These practices generally imply lower economic efficiency and very poor asset quality, which could undermine the banking sector. Finally, opaque terms of governance and corruption are significantly affecting the business climate, which remains difficult for foreign companies.
