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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011
STATE COMMODITY & RAW MATERIALS EXCHANGE OF TURKMENISTAN
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment
Mr Berdymukhamedov has presided over
some modest reforms, taking steps to redress
some of the more damaging policies
implemented by his predecessor, Saparmurad
Niyazov. However, prospects for a
fundamental shift towards a more liberal
political system seem remote. Reforms are not
expected to result in a more transparent or
democratic political process. The number of
deputies in the Mejles (parliament) was
increased, ostensibly to ensure better
representation of the population, but it enjoys
no greater authority than its predecessor.
Crucial to Mr Berdymukhamedov's survival in
office will be rewarding officials and balancing
competing interests–ensuring the flow of gas
exports, and hence inflows of foreign
exchange–which underpin the patronage
network. This will require a resolution to the
dispute with Russia stemming from the
shutdown (due to an explosion in early April)
of the main gas export pipeline to Russia,
halting most Turkmen gas exports for at least
three months, and evolving into a dispute over
the price of Turkmen gas exports to Russia.
The administration is considering taking
Turkmenistan some way along the path
followed by Kazakhstan: making the country
more welcoming to foreign investment, but
keeping political liberalisation to a minimum.
Although Russia will remain Turkmenistan's
largest gas export market in 2009-10, it will
face growing competition from China, the EU
and, potentially, the Middle East. However, with
global energy prices set to remain depressed
for some time, doubts over the commercial
viability of such projects will persist, and will
make it more difficult to find the necessary
financing, particularly given that many of the
EU's larger economies are expected to post
negative growth in 2009. For this reason,
Russia is expected to remain Turkmenistan's
largest gas export market for the foreseeable
future. China and Turkmenistan are
constructing a gas pipeline that will connect
the two countries. Turkmenistan says that it will
be ready to start pumping gas at end-2009,
with China eventually expected to import up to
30bn cu metres annually from Turkmenistan
along this route. Turkmenistan will also
promote closer links with countries in the
Middle East, such as Jordan, which will give it
further leverage.
Economic Performance
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.
Despite Mr Berdymukhamedov's stated
willingness to contemplate economic reforms,
he has in practice presided over few reformist
measures in his two years in office. The state
retains a dominant role in all sectors of the
economy, and relies on subsidies, price
controls, and the free provision of utilities, to
keep the economy afloat. State control over
the leading economic sectors remains tight,
the public finances remain opaque, and
monetary policy remains rudimentary. Some
policy changes are possible in the
hydrocarbons sector; recognising the country's
technological and financial limitations in
development of the sector, the president has
been more receptive to foreign oil and gas
companies wishing to invest in the industry.
Companies from countries such as Russia and
China, having greater experience of operating
in Turkmenistan, will be well prepared to work
within existing constraints. Serious restrictions
on liquidity, especially in 2009, are likely to limit
Russian investment. Owing to likely losses to
budget revenue from the disruption to gas
exports from early April, it is forecast a deficit
equivalent to 1% of GDP in 2009, up from our
previous forecast of 0.1%. The deficit is
expected to decline moderately in 2010, to
0.5% of GDP.
Despite evidence that the global economy is
stabilising, the outlook remains extremely
subdued.
After posting estimated growth of 3% in 2008,
the economy is expected to contract by 5% in
2009. Russian investment will be lower than in
recent years. Chinese investment into the
Turkmen hydrocarbons sector will provide
some support for the economy, but investment
from other sources will remain minimal.
Agricultural output should improve from 2009
owing to the weak base established in 2007-
08, but the sector will continue to experience
serious difficulties because of the lack of
reform.
Estimated inflation in 2008 accelerated to 13%
due to large increases in prices of fuel and
public transport, as well as higher prices for
imported foodstuffs. The rate is expected to
accelerate further in 2009, to 15%; although
global non-oil commodity prices are forecast
to fall, the price of imported goods will be
pushed upwards by the devaluation and
redenomination of the manat. Base effects
should allow consumer price inflation to
decelerate to around 12% in 2010.
A current-account surplus was estimated at
US$4.7bn in 2008, equivalent to more than
50% of GDP, and is expected to continue to
post substantial, although smaller, surpluses
throughout the forecast period. Price trends for
imports of capital goods are favourable, and
the devaluation of the official exchange rate
and restrictions on access to foreign
exchange, in conjunction with tariff and nontariff
barriers, will keep import growth muted.
Export revenue will be lower. Reliance on
imported services in sectors such as
construction and hydrocarbons will result in
moderate growth in services debits. Transit
trade will provide only limited services credits,
ensuring that the services deficit remains
relatively large. Gas exports will keep the
overall current account in strong surplus—
albeit substantially lower than previously
forecast.*
* The Economist Intelligence Unit Limited, July 2009
REAL GDP
(TMM millions)
CONSUMER PRICES (% CHANGE PA; AV)
(%)
25
20
15
10
5
0
6
2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010
13
12
11
10
9
8
7
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