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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006
STATE COMMODITY & RAW MATERIALS EXCHANGE OF TURKMENISTAN
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment
The president, Saparmurad Niyazov, is
expected to remain in power over the twoyear
forecast period. Prospects for the
introduction of any kind of political pluralism
are negligible. The political upheavals
elsewhere in the former Soviet Union over
the past couple of years will have reinforced
Mr. Niyazov's belief that any attempt at
reform risks undermining his position. He will
continue to rely on the practices that have
sustained his rule until now: guaranteeing
basic welfare provision, minimising political
freedom, and maintaining an extensive
patronage network to ensure the support of
the political elite.
Turkmenistan's foreign policy will continue to
concentrate on securing new gas export
deals and further investment for the
hydrocarbons sector. A reported agreement
reached with China in April 2006 providing
for the construction of a new gas pipeline
linking the two countries should give
Turkmenistan some leverage in its export
negotiations with other markets, such as
Ukraine and Russia. However, until the
pipeline is built–and it is by no means certain
that the project will go ahead–Turkmenistan
will remain reliant on the Russian pipeline
network for the majority of its exports.
The growing gas export capacity of
Kazakhstan and Uzbekistan, two of
Turkmenistan's neighbours, is likely to
weaken Turkmenistan's bargaining position
in its negotiations with all potential export
markets.
Widespread reports of corruption and
mismanagement, sluggish growth in output
in the hydrocarbons sector and the fourth
consecutive poor cotton harvest support the
view that Turkmenistan's economic system is
coming under increasing strain. Instead of
prompting a relaxation of current statist
policies, however, this will ensure that policy
becomes even less liberal during the
forecast period. Any attempt to introduce a
more market-oriented system would require
a fundamental restructuring, which would
carry substantial political risk for Mr. Niyazov.
Economic Performance
The hydrocarbons sector will remain the
principal engine of economic growth in
2006-07, although, because of capacity
constraints, oil and gas output will rise less
rapidly than in recent years. The government
will focus on raising the value added of
hydrocarbons exports by developing the
downstream sector and increasing output of
refined products. Construction is expected to
remain an important contributor to growth,
both in terms of new prestige projects and,
potentially, through the development of
infrastructure for the hydrocarbons sector.
We forecast real GDP growth of 9% in 2006,
with a slight deceleration in 2007 owing to
lower global hydrocarbons prices. Official
statistics will continue to overstate output,
probably reporting growth rates of around
20%.
Turkmenistan's rural areas are reportedly
completely demonetised, and recorded
statistics for inflation mainly reflect price
trends in urban centres. However, even in
this limited context the official consumer
price data give an inaccurate reflection of
price pressures, as most household goods
are obtained on the black market. Extensive
barter transactions between state enterprises
and individual consumers also serve to keep
recorded inflation low. Inflationary pressure
stemming from rises in public-sector wages
and benefits–funded in part by printing
money–will be offset to some extent by the
fact that these payment increases are rarely
received in full.
The government will support the official
exchange rate at Manat5,200:US$1
throughout 2006-07, using a combination of
currency restrictions and hard-currency
inflows from hydrocarbons exports.
The spread between the official and the
black-market rates is likely to remain
relatively stable.
* Economic Intelligence Unit Ltd., April 2006
1999-ORIGINS OF GROSS DOMESTIC PRODUCT (%)
Industry Agriculture & forestry
Construction Services
2003-COMPONENTS OF GROSS DOMESTIC PRODUCT (%)
Private consumption Imports of goods & services Exports of goods & services
Public consumption Gross fixed investment Changes in stocks
26.0
80
32.0
11.0
60
31.0
40
20
0
Source: World Bank reports
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