Country Context



Population, million


GDP, current US$ billion


GDP per capita, current US$


School Enrollment, primary (% gross)


Life Expectancy at Birth, years (2014)


Despite its upper-middle-income status, Turkmenistan is still at an early stage of transition. Indeed, its abundant natural resources have arguably masked the need for change, delaying first generation reforms such as price and trade liberalization, privatization, and the creation of institutions for market regulation, which began only after 2007. Thus, the public sector still plays a leading role in the economy, and economic policy decision making remains highly centralized. Action toward privatizing large enterprises and improvements in governance (including accountability, transparency, and voice), enterprise restructuring, and competition policy have been negligible.

Growth remains highly dependent on hydrocarbons and related sectors. After the successful diversification of natural gas export routes in 2009, China became the largest export market for Turkmenistan. Medium-term plans envisage a further increase in natural gas exports to China and other destinations in East and South Asia, while exports to Russia came to a halt due to transit pricing disputes. Exports of natural gas to Iran remain limited. In this context, a planned third pipeline to China and the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, if they materialize, would more than double gas export capacity.

Despite the ongoing and planned diversification of markets, Turkmenistan’s exports are increasingly dependent on a single large market (China) and continue to be dominated by a single product (natural gas), making the economy vulnerable to fluctuations in global prices beyond its control.


On November 3, 2015, the World Bank Board of Executive Directors discussed the new Country Engagement Note (CEN) for the period covering FY2016–17. The program is expected to deepen collaboration in areas included under the previous interim strategy and broaden it into selected new areas critical to increased competitiveness. Specifically, the proposed areas of engagement include: i) improving data for policy making and governance; ii) modernizing the financial sector; iii) enhancing competitiveness; and iv) managing natural resources efficiently. 

The new strategy of engagement in Turkmenistan focuses on sharing with the Turkmen authorities the World Bank Group’s international knowledge, experiences, and best practices in several areas relevant to Turkmenistan’s growth agenda and integration into the global economy. The new strategy includes follow-up activities in the areas of ongoing engagement, as well as additional activities in new sectors.

The knowledge-based program, which is at the cornerstone of the CEN, is fully consistent with the Government’s strategic priorities and will be delivered mostly through the Reimbursable Advisory Services (RAS). The Government of Turkmenistan will primarily fund this program, which will be supplemented by the World Bank Group’s other advisory and analytical services.


Reimbursable Advisory Services Program

On September 30, 2013, the World Bank Group and the Ministry of Finance of Turkmenistan signed a Reimbursable Advisory Services (RAS) agreement, a two-year program that was an integral part of the Interim Strategy Note (ISN) for Turkmenistan for the period covering FY2014–15.

The activities under the RAS agreement were financed by the Government of Turkmenistan and focused on areas proposed by the Turkmen authorities, namely, macroeconomic statistics, financial sector development, and private sector development. The entire program under the RAS was arranged, managed, delivered, and supervised by the World Bank Group in line with best practices.


Most ISN-RAS activities and outputs have been delivered as planned, and the results were considered broadly satisfactory by both the Turkmenistan authorities and the World Bank Group. Overall, the level and quality of the authorities’ engagement in the RAS-funded tasks were higher and timelier than in the Bank-financed advisory studies, with the exception of the RAS program’s privatization component, where planned IFC support for individual privatization transactions did not materialize. Nonetheless, the Bank-funded advisory studies were important in facilitating an initial policy dialogue on structural issues, such as banking system reform and private sector development.


Recent Economic Developments

In 2016, like many countries in the region, Turkmenistan continued to adjust to lower commodity prices and sluggish external demand. Prices of natural gas, the main export item of Turkmenistan, continued falling throughout June 2016, adversely affecting external and fiscal balances and depressing domestic demand. Official data suggest that GDP growth slowed to 6.2% y-o-y during the first half of 2016 from 8.7% during the same period of 2015. Net exports were the main contributor to the slowdown.

Export revenue dropped by 40.5% y-o-y during the first half of 2016, while imports declined by just 5.1%. Private consumption growth slowed, as represented indirectly by a slowdown in retail trade growth to 16.1% y-o-y during the first half of 2016 from 19.5% during the same period of 2015. Fixed capital investment growth almost halved from 7.9% y-o-y to 4.3% in the same time frame, as the Government continued to look for efficiencies in its capital budget.

On the supply side, growth was supported by services and construction, while industry grew moderately as natural gas production stalled, affected by weaker external demand that was mainly driven by the slowdown of the Chinese economy. Agriculture output growth was supported by government subsidies provided to small-scale export-oriented and import-substituting agriculture producers.

After the January 2015 devaluation, the official exchange rate remained stable at 3.5 manat per the U.S. dollar. In 2016, monetary policy has continued to support the exchange rate peg, while policy tools available at the central bank for controlling inflation remain limited. Inflation is moderating due to weaker domestic demand and tighter monetary conditions. To maintain the peg, the authorities introduced administrative measures, including restrictions for foreign exchange operations, to curb foreign exchange outflows.

Fiscal consolidation measures during the past 12 months have included a rationalization of public investment, an increase in nonhydrocarbon revenue, the development of a privatization program, and improvements in the efficiency of subsidies and social benefits. In late 2015 and early 2016, the Council of Elders indicated that social subsidies were no longer justified and asked the Government to dismantle the subsidy system. In April 2016, the authorities announced plans to reduce fiscal expenditures. Public subsidies for electricity, gas, and water supply are expected to be scaled back over the medium term.

Economic Outlook

The baseline scenario assumes only a moderate recovery of hydrocarbon prices in the second half of 2016, indicating that GDP growth for the year may stay at the current rate of 6.2%. The current account deficit is expected to widen from 12.3% of GDP in 2015 to over 13% in 2016, financed by ample foreign direct investment inflows in the hydrocarbon sector. Despite the new measures, the fiscal deficit may double from 0.7% of GDP in 2015 to about 2% in 2016, requiring further efficiencies and a reprioritization of the government budget.

Over the medium term, Turkmenistan’s growth rate is likely to remain lower than during the commodities price boom. If export volumes recover, owing to the implementation of new gas export agreements (which are likely), the growth of Turkmenistan’s economy may be expected to increase from 2017 onward. If global energy demand improves, the medium-term growth prospects of Turkmenistan will also improve. 


Since 1992, at the request of the Government, the Bank prepared a number of studies and extended three loans to Turkmenistan.

Other Bank activities in Turkmenistan included the Statistical Capacity Building Project, the Civil Society Fund Program, which is now being transformed into a Global Partnership for Social Accountability Program, the Avian Influenza Control and Human Pandemic Preparedness and Response Project.

At the Government’s request, the Bank also provided advice on a number of issues, including but not limited to, national wealth funds, an Accounting and Auditing Report on the Observance of Standards and Codes (ROSC), the modernization of the Hydromet agency, the anti-money-laundering/combating the financing of terrorism (AML/CFT) legal framework along with the International Monetary Fund (IMF), transport and logistics issues, and international experience in the ports sector.