Turkmenistan: Economy

Growth slowed to 6.5% in Turkmenistan in 2015 with the decline in global energy prices, and the current account deficit widened to 11.8% of the gross domestic product (GDP) with exports falling more than imports. Growth is forecast to remain at 6.5% in 2016 on reduced energy earnings, then recover to 7.0% in 2017 with expected higher petroleum prices. Diversifying the highly concentrated export sector would help smooth output volatility and create jobs to absorb a young and growing working-age population.

Selected economic indicators (%) – Turkmenistan 2015 2016 Forecast 2017 Forecast
GDP Growth 6.5 6.5 7.0
Inflation 6.0 6.6 6.0
Current Account Balance (share of GDP) -11.8 -12.3 -10.0

Source: Asian Development Outlook 2016

Economic performance

The government reported growth at 6.5% in 2015, down from 10.3% a year earlier. The slowdown reflected declines in energy prices, but growth found support from investments in social and industrial development, which picked up to 7.8% from 6.7% in 2014.

On the supply side, slower growth in hydrocarbons cut expansion in industry to 3.1% from 11.4% in 2014. Growth in agriculture accelerated to 7.9% from 4.2% a year earlier, reflecting good harvests of wheat and cotton and increased livestock farming. Expansion in services diminished slightly, to 10.0% from 10.6% in 2014, mainly due to slower growth in services related to construction.

Average annual inflation is estimated to have held steady at 6.0%. Despite the 19% devaluation of the Turkmen manat at the beginning of the 2015, prices for food and services stabilized during the second half with price controls, state subsidies, and the absence of further depreciation. The government’s import-substitution policy contributed by helping to fill the market with less expensive locally produced food and household goods. Broad money growth slowed to 8.4% from 11.4% in 2014. However, growth in private credit is estimated to have risen to 30.0% from 20.9% in 2014, reflecting mainly import substitution and construction by small and medium-sized enterprises.

Economic prospects

The economy relies heavily on oil and gas exports, the earnings from which are envisioned to remain weak with lower prices. This may prompt the government to cut spending, but a low public debt ratio and considerable fiscal reserves allow it to adjust gradually and sustain growth through social spending and public investment that support the nonhydrocarbon economy.

Growth is projected steady at 6.5% in 2016, rising to 7.0% in 2017. However, it could be lower if external weakness persists, requiring the government to implement more stringent fiscal adjustment.

To limit inflation, the government will continue import-substitution policies and price controls. Inflation is nevertheless projected rising to 6.6% in 2016 before returning to 6.0% in 2017, assuming no further manat depreciation. The Central Bank of Turkmenistan will likely tighten monetary policy by restraining credit expansion. Broad money growth is expected to slow further to 7.2% in 2016.

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