World Bank Eyes Expansion of Cooperation with Turkmenistan to Boost Socio-Economic Development

Background and Objectives

The World Bank and the Government of Turkmenistan are engaged in discussions to identify potential areas for expanding cooperation, aimed at supporting the country’s socioeconomic development goals. The partnership is focused on transferring global knowledge and expertise, as well as capacity-building activities.

Since 2016-18, the World Bank and Turkmen authorities have collaborated under the second Rapid Analytics Support (RAS) agreement, a key component of the Country Economic Note (CEN) for Turkmenistan. The RAS program supported business model reform and corporate governance in the banking sector, developed a credit reporting system, and strengthened macroeconomic statistics.

Recent Economic Developments

GDP Growth and Fiscal Consolidation

Turkmenistan’s real GDP growth slowed slightly to 6.2% in 2018, driven by a decline in non-hydrocarbon economic activity. Net exports contributed positively to economic growth, but was offset by weakened domestic demand reflecting reduced public investment and budget subsidies for utilities. The country’s fiscal consolidation efforts resulted in a nearly balanced budget in 2018.

External Position

The external position reversed in 2018, with a current account surplus of 5.7% of GDP compared to a deficit of 10.3% in 2017, driven by higher natural gas prices and export volumes.

Economic Outlook

Turkmenistan’s economic outlook is expected to be challenging due to projected falls in natural gas prices and softening global demand for energy resources. The global economy, including China and Russia, is expected to slow down in 2019-20. To mitigate these challenges, policies aimed at fostering private sector development and economic diversification should be prioritized.

Recommendations

To promote inclusive growth, the authorities should prioritize policies aimed at promoting private sector development and economic diversification. Inflationary and exchange rate pressures are expected to remain as hydrocarbon earnings decline. The government is likely to adhere to an exchange rate peg, with adjustments largely dependent on the evolution of public sector foreign liabilities.

Conclusion

The World Bank will continue to support Turkmenistan’s socioeconomic development goals through its partnership with the country.