Country Report Turkmenistan July 2009

Outlook for 2009-10

The president, Gurbanguly Berdymukhamedov, is not expected to liberalise significantly the authoritarian political system of his predecessor, Saparmurad Niyazov. He will preserve Mr Niyazov's statist economic policies, albeit with greater willingness to contemplate minor reforms. Russia will remain Turkmenistan's main foreign partner, but stronger ties with other countries will be pursued in the interests of developing the hydrocarbons sector and diversifying export routes. In the light of the extremely unfavourable external economic environment and disruption to gas exports, the Economist Intelligence Unit expects real GDP to contract by 5% in 2009, before a rebound to 8% growth in 2010 as gas exports to China start. The current account will retain a large surplus, albeit considerably smaller than in recent years.

The political scene

Mr Berdymukhamedov has carried out further dismissals of leading officials, including Orazgeldy Amanmuradov as interior minister following a corruption scandal. Serious tensions have arisen in relations with Russia owing to a dispute over Turkmen gas exports, which have been virtually halted since April, and ties with the EU and the US are being strengthened.

Economic policy

The IMF has praised the authorities' "prudent" macroeconomic policies, but the loss of a sizeable part of gas export revenue is likely to be placing serious strains on the budget. The Avaza tourist area has opened, and a new labour code, intended to improve job security, has been approved. Tensions are rising over water management in Central Asia.

The domestic economy

Few output figures have been reported so far for 2009, perhaps in an indication of the serious problems confronting the economy. Investment appears to be growing strongly. However, the shutdown of most gas exports to Russia following a pipeline explosion on April 9th will be having a devastating effect on economic performance. Turkmenistan has stepped up moves to diversify its energy exports, and China is ahead of the EU in taking advantage.

Foreign trade and payments

According to the authorities, Turkmen trade turnover increased by 76% year on year in January-February 2009. However, exports will have slumped following the shutdown of most gas exports since April. The country's external holdings remain considerable, suggesting that the authorities could cope with a disruption to gas exports in the short term.

This report covers the following industry codes:
SIC Code: 49
NAICS Code: 22