Regions and Countries

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p. 12 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan Azerbaijan Mongolia People’s Republic of China Southeast Asia South Asia The Pacific

Turkmenistan

Economic performance

Economic growth: Turkmenistan experienced a sharp fall in GDP following independence. Since 1998, however, the economy has improved steadily. For the first time since independence, real GDP increased, rising by 7 percent in 1998 and 16 percent in 1999. These increases resulted from improved cotton, wheat, gas, and oil production. In 2000, GDP growth increased to 17.6 percent, mainly because of large-scale gas exports to Russia.

Employment: Turkmenistan guarantees employment to every citizen. Thus, official unemployment figures do not exist. The share of employment of working age people (defined as men between the ages of 16 and 59 and women between the ages of 16 and 54) decreased from 78 percent of the labor force in 1992 to 74.4 percent in 1998, despite a steady increase in the employable population, indicating an overall increase in hidden unemployment. Almost 48 percent of the population is employed in agriculture, including forestry and fisheries, while less than 13 percent work in the industry sector.

Inflation: Inflation has remained low since 1998, not only because of tight monetary control, but also because of an extensive subsidy for basic consumer goods. Year-on-year inflation for the first five months of 2000 was about 11 percent, compared with an average of 20 percent for the same period in 1999.

Fiscal balance: Unlike most republics of the former Soviet Union, Turkmenistan did not incur a fiscal crisis after independence. According to official statistics, state budget deficits appeared to be under control. Data released by the finance ministry in early July showed a budget surplus equivalent to 0.3 percent of GDP for the period January–June 2000.

External sector:⁹ The current account deficit widened to 33 percent of GDP in 1998, mainly caused by a difficult export situation, accompanied by rising imports. With the resumption of gas exports to Russia, the trade balance improved, with a recorded trade surplus of $400 million for the first nine months of 2000. The current account is expected to experience a small deficit in 2000, mainly as a result of a growing deficit in the services account.

The capital account improved significantly after independence, recording an $870 million surplus in 1998. Turkmenistan’s external debt surged to 54.0 percent of GDP in 1999 from a debt-free position following independence. Reflecting the rise in external debt and the fall in export earnings, the debt service ratio increased from 35.1 percent in 1997 to 97.6 percent in 1998, dropping to 55.0 percent in 1999 following a sharp increase in export revenues. The country’s gross official reserves reached $1.5 billion (equivalent to about 14 months of imports) in 1999.

Several measures have been taken to attract foreign direct investment (FDI) since independence. FDI peaked at $233.0 million in 1995 and has declined to around $100.0 million in 1999.

Domestic policies: The Government is pursuing a strategy of social and economic transformation. Extensive state-led investment and ambitious agricultural targets appear in the development plan, which may not be feasible, given the lack of FDI and concessional assistance and the ongoing regionwide drought.

The Government’s progress in privatization has been limited. Only a few state-owned enterprises have been privatized, and their importance to the economy as a whole is marginal. Moreover, the private sector has limited access to foreign exchange, making structural investments—which would require foreign equipment—difficult.

The main challenges facing the Government are consolidating the budget and improving public resource management, unifying and liberalizing the exchange rate, and reducing further the role of the state in commercial and productive activities. Turkmenistan has good long-term potential for developing its resource base, but realizing this will require significant changes in policies and carefully managing debt and public expenditure. Diversifying the economy remains a challenge, since it remains dominated by the production and export of energy and cotton and is thus vulnerable to external shocks.

ADB operations

Turkmenistan became ADB’s 59^th member in August 2000. An economic mission visited Turkmenistan in November 2000 to gather information needed to prepare an economic report and an interim operational strategy that will define ADB’s initial development cooperation activities in the country.

The proposed strategy, which will be consistent with the Government’s long-term development objectives as described in its 2000–2010 Development Program and with ADB’s objective to reduce poverty, will have two main strategic objectives: (i) enhance human and social development and (ii) promote sustainable economic growth. The focus of human and social development will be on maintaining and upgrading the human resource base in terms of basic education and vocational training; building capacity to improve public sector management; and improving basic services, such as clean drinking water, sanitation, and heating, especially for the rural poor. The focus of sustainable growth will include improving the technological efficiency of agricultural production; ensuring ecological safety primarily in terms of bettering the management of water resources to increase efficiency and improve maintenance of irrigation systems; and encouraging private sector development.

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