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TURKMENISTAN Table 1
2017
P o pulatio n, millio na
5.7
GDP , current US$ billio nb
42.4
GDP per capita, current US$ b
7355
Scho o l enro llment, primary (% gro ss)c
89.4
Life expectancy at birth, years d
67.6
Sources: UNPD, M acro Poverty Outlook, and WDI. Notes: (a) UNPD staff estimates (2016). (b) World Bank staff estimates (2017). (c) M ost recent WDI value (2014). (d) M ost recent WDI value (2015).
Turkmenistan’s real GDP growth rate rose by 6.5 percent year-on-year in 2017, mainly supported by a recovery in hydrocarbon prices. The external and fiscal accounts improved according to official data, but inflation surged to double-digits, hinting at a possible buildup of imbalances. The rise of inflation and the gradual removal of welfare subsidies for utilities has negatively impacted the purchasing power of households. The country’s growth outlook remains positive, but risks are tilted downwards, given the needed structural reforms aimed at boosting privatesector development.
Recent developments The official real GDP growth rate accelerated slightly—from 6.2 percent in 2016 to an estimated 6.5 percent in 2017. Growth was largely supported by more favorable terms of trade, primarily reflecting a recovery in global gas prices, which rose by 24 percent year-on-year. China remains the largest purchaser of Turkmen gas, while a price dispute with Iran over gas supplies remains unresolved and has affected export revenues. In early 2018, Iran announced readiness to file a case with the International Court of Arbitration. The domestic retail trade sector grew at an annual rate of 19 percent in 2017, as an expansion of credit and government transfers supported consumption growth; the transport and communications sector grew by 11 percent year-on-year, and the service sector grew at an annual rate of 9 percent. However, gross fixed investments fell sharply (by almost 9 percent year-onyear), as flows of both domestic and foreign direct investments fell, dampening growth in the construction sector. Moreover, agriculture output increased by a mere 5 percent, just below GDP growth, suggesting less growth dividends for a large share of the population employed in the agricultural sector. Consumer price inflation hiked from 6.2 percent in the end of 2016 to 10.4 percent by the end of 2017. Inflation was driven by the high pressure on the foreign exchange (FX) markets, which pushed up the prices of imported goods, as well as an upward
FIGURE 1 Turkmenistan / Real GDP growth and gas prices
Percent 16
USD/TMT
11.1
12 9.2
10.2
8
6.5
6.2
6.5
3.4
-10 -30
3.8
2
-40
4.0
-50
4.2
2011
2012
2013
Real GDP growth (LHS)
2014
2015
2016
2017
60
3.6
-20
2010
80
3.2
0
4
0
100
3.0
10
6
120
2.8
20
10.3
US$ per barrel
2.6
30
14
10
FIGURE 2 Turkmenistan / Exchange rate and oil prices
Percent 40
14.7
adjustment of the highly subsidized fuel prices, including for utilities, and a 10 percent rise in public-sector salaries, pensions, and other government payments. The current account deficit remained high in 2017, although with some improvement due to a recovery in global hydrocarbon prices and a substantial contraction in imports. After falling in 2015-16, export revenues grew by 3.6 percent year-on-year in 2017; still not sufficient to close the external gap. In contrast, imports continued to decline, falling by 23 percent in 2017. The sharp drop in imports was due to tighter trade regulations and significant pressures on the FX markets as the authorities avoided tapping on their buffers, restricting liquidity in the FX markets. The monetary authorities continued to strengthen oversight and control of FX operations, and adopted restrictions that limited foreign currency withdrawals from cash, bank cards, and cross-border transactions in 2017. The drying up of FX liquidity in the domestic markets suggests that a correction of the official exchange rate (currently pegged at 3.5 manat per US dollar) may need to be considered, along with other macroeconomic and structural reforms to reduce the external imbalances. The Turkmen authorities continued their fiscal consolidation efforts and balanced the state budget in 2017, compared to the 1.3 percent deficit in 2016. Compared to government plans, revenue collection over -performed by 1.8 percent in 2017, while expenditures underperformed by 3.6 percent, primarily due to cuts in capital spending and a gradual elimination of welfare subsidies since the last quarter of
Change in gas prices (RHS)
40 20
2010
2011
2012
2013
2014
Exchange rate, TMT/US$ (LHS)
Source: State Statistics Committee of Turkmenistan.
Source: Central Bank of Turkmenistan. MPO
80
Apr 18
2015
2016
2017
0
Oil prices, average (RHS)