Turkmenistan: Country outlook

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Economist Intelligence Unit
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Economy, Outlook, Forecast, Overview
Political Geography

Turkmenistan: Country outlook


POLITICAL STABILITY: Turkmenistan is a dictatorship and is one of the world's most secretive, closed and authoritarian countries. The presidency of Gurbanguly Berdymukhamedov, who was first elected in 2007, has not brought about any advances in political, social or media freedom, and the economy remains dominated by state-owned monopolies. The Economist Intelligence Unit expects Mr Berdymukhamedov, who was re-elected for a third term in the February 2017 presidential election--which was not a meaningful electoral contest--to remain in power throughout the forecast period (2021-22).

ELECTION WATCH: Elections in Turkmenistan are neither free nor fair. Mr Berdymukhamedov won the presidential election in February 2017 with 97.7% of the vote. Constitutional changes adopted by parliament in September 2016 secured him a seven-year term, until 2024 (the previous duration was five years). The constitution does not limit the number of presidential terms, so Mr Berdymukhamedov could run for president indefinitely. He is likely to continue to dominate the political scene in the medium term.

INTERNATIONAL RELATIONS: Turkmenistan has an official policy of neutrality and avoids formal engagement in multilateral organisations. Diversifying gas export markets is the main aim of its economic and foreign policy. In July 2019 Russian gas company Gazprom announced that it had signed a contract with the Turkmen government to import 5.5bn cu metres of natural gas per year in 2019-24; gas deliveries to Russia were reinstated in August 2019 after having been halted in 2016. Nevertheless, Turkmenistan remains highly dependent on China as its main natural-gas customer. Plans to increase gas exports to China will be difficult to realise without swift delivery of the fourth branch ("Line D") of the Central Asia-China gas pipeline. Owing to delays in construction, however, we do not expect the fourth branch to be completed in the forecast period. Moreover, Turkmenistan's monopoly on China's pipeline gas imports has already been challenged, as the so-called Power of Siberia, Russia's gas pipeline to China, became operational in December 2019. Gazprom has begun design work on another pipeline, Power of Siberia 2, with the aim of delivering a further 50bn cu metres per year to China, through Mongolia.

POLICY TRENDS: There have so far been no officially confirmed cases of coronavirus (Covid-19) in Turkmenistan, but independent reports of rising numbers of pneumonia cases suggest otherwise. The government has introduced a series of measures to prevent the spread of the virus. International flights have been suspended and domestic travel has been heavily restricted. Crossing state borders is strictly controlled, and individuals returning to the country are being placed in quarantine. The government has closed some shops, restaurants and shopping centres, but there has been no nationwide lockdown. In May 2020 the government adopted a plan to counter acute infectious diseases, which suggests modernising the health system and improving training for medical personnel. The most recent mission by the World Health Organisation, in July, urged the authorities to take all necessary precautions. In November the wearing of face masks was made mandatory in public places, both indoors and outdoors, with fines of up to Manat50 (US$14) for those who fail to comply.

ECONOMIC GROWTH: The state plays a dominant role in the economy, owing to the absence of a meaningful private sector. In 2020 we estimate that the economy contracted by 1.1%, as a result both of low global energy prices and the impact of global and domestic measures to fight the coronavirus pandemic. A sharp decline in export earnings and decreasing private consumption have pushed the economy into its first recession since 2009.

INFLATION: No reliable inflation data are available in Turkmenistan. Annual price growth is believed to be high, given the weak monetary framework and restrictions on currency exchange and imports, which have created shortages of basic goods. We estimate that inflation increased to 15.4% in 2020. Restrictions on imports have caused food shortages and a consequent surge in food prices, but this has been partly offset by suppressed demand and lower energy prices.

EXCHANGE RATES: The authorities operate an official peg of Manat3.5:US$1, but access to foreign currency at this rate is restricted, resulting in a black-market rate that is significantly weaker. Restrictions on foreign-currency sales and international money transfers were tightened in 2016. On December 6th 2020 the manat was trading at Manat27:US$1 on the black market, a sharp increase from about Manat23:US$1 in September, according to a news portal, Chronicles of Turkmenistan.

EXTERNAL SECTOR: The most important determinant of the current-account balance is Turkmenistan's export earnings from its natural-gas sales. China is a vital market for these. Data from the IMF's Direction of Trade Statistics show that merchandise exports to China grew by 7% in 2019 and comprised 85.3% of Turkmenistan's goods exports.

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