High growth at 10.3% in 2014 reflected robust public investment and gas exports in Turkmenistan. Strong foreign direct investment nevertheless drove the current account to a deficit of 4.4% of the gross domestic product (GDP). Growth is projected to slow to 9.7% in 2015 and 9.2% in 2016, and the current account deficit to widen further to 8.4% of GDP before moderating to 6.2% in 2016. Inflation is forecast to reach 7.0% before subsiding to 6.5%.
|Selected Economic Indicators (%) - Turkmenistan||2015||2016|
|Current Account Balance (share of GDP)||-8.4||-6.2|
Source: ADB estimates.
The Turkmenistan government reported growth in 2014 at 10.3%, slightly above 10.2% a year earlier. The large hydrocarbon sector grew by 6.1%, while the rest of the economy expanded twice as fast, by 13.0%.
On the supply side, industry and services were the main sources of growth. The government reported that industry expanded by 11.4% in 2014, an improvement from 7.3% in 2013 that reflected faster growth in hydrocarbons, electricity, chemicals, construction materials, textiles, and agro-industrial products. Expansion in services slowed to 10.6% from 12.7% in 2013. Growth in agriculture decelerated to 4.2% from 10.0% in 2013 as unfavorable weather held wheat and livestock production below targets.
On the demand side, strong investment was the main source of growth. Public investment for infrastructure under the National Program of Socio-Economic Development of Turkmenistan for 2012-2016 expanded by 6.7% in 2014, compared with 7.1% in 2013.
With hydrocarbons representing more than 90% of exports, the continued decline in energy prices and fluctuating demand for Turkmen gas will likely reduce export revenues, weakening the current account. However, Turkmenistan has strong external buffers, as the International Monetary Fund estimated its foreign exchange reserves equal to 22 months of imports in 2014. Moreover, breakeven petroleum prices for the fiscal and external balance are considered to be the lowest in the region, providing some insulation against fluctuating energy prices.
Growth in the gross domestic product is projected to slow to 9.7% in 2015 and 9.2% in 2016, reflecting lower public investment. Growth will slow further if external difficulties persist and require fiscal adjustment.
Excerpted from the Asian Development Outlook 2015.