IMF Staff Completes 2019 Article IV Mission to Turkmenistan
IMF News, April 10, 2019
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- Published: April 10, 2019
Mission context and timing
- An IMF mission led by Ms. Natalia Tamirisa visited Ashgabat during March 26-April 9, 2019 to assess macroeconomic and financial developments and discuss economic challenges and policy priorities with senior government officials, representatives of the business and financial sectors, and the diplomatic community.
- End-of-Mission press releases convey preliminary findings and do not necessarily represent the views of the IMF’s Executive Board. Staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
- PRESS OFFICER: Randa Elnagar. Phone: +1 202 623-7100. Email: MEDIA@IMF.org
- The next staff visit is tentatively scheduled for October 2019.
Main findings on recent developments
- Economic slowdown drivers:
- Economic growth slowed because of declining public investment and a more active use of foreign exchange regulations, which weighed on private investment and consumption.
- The resulting significant decline in imports, together with higher-than-expected hydrocarbon prices, turned the external balance into a surplus.
- External balance outlook and risks:
- The improvement in the external balance is likely to be temporary, given that the official exchange rate remains above the equilibrium value, investment is expected to rise, and the outlook for hydrocarbon prices is subdued.
- Risks are tilted to the downside, stemming from the possibility of lower-than-expected return on past investment, rising external financing costs, and geopolitical and regional uncertainties.
Policy recommendations and structural priorities
- Macroeconomic policy sequencing and social protection:
- Achieving development goals without widening external imbalances requires improving competitiveness and currency convertibility, while further moderating public investment and credit growth.
- Adjustment measures should be carefully sequenced and accompanied by an assessment of their impact on the vulnerable and well-targeted social protection.
- Market and structural reforms:
- Accelerate market-oriented reforms and build human capital to sustain, diversify, and make growth more inclusive.
- Key steps include privatizing state-owned enterprises, promoting competition, enhancing the rule of law, and reducing red tape.
- Phase out import-substitution policies to make exports more competitive and help diversify the economy.
- Financial sector and governance:
- Reduce directed cheap credit and reflect underlying risks in bank lending terms to steer financial resources to the most productive use.
- Strengthen prudential regulation and supervision of banks and align with international standards to preserve financial stability and integrity.
- Improve governance to reduce corruption risks and improve business and investment climate; participation in the World Bank’s cross-country project on Doing Business indicators would be useful.
- Public finance, investment, and digital infrastructure:
- Improve policy frameworks for management of public finances, debt, and investment to enhance policy effectiveness.
- Improve access to internet and increase the use of digital technologies.
- Data, transparency, and human capital:
- Further improvements in the availability, quality, and reliability of economic statistics produced by official institutions and greater transparency in data and government regulations are crucial to encourage private investment and improve access to financing alongside supporting decision-making and credibility.
- Improve the education and health systems to nurture talent and skills needed to complement infrastructure investment.
Selected Risks Highlighted
- Temporary nature of external surplus given official exchange rate and expected investment rise.
- Downside risks from:
- lower-than-expected returns on past investment,
- rising external financing costs,
- geopolitical and regional uncertainties.
Turkmenistan: Selected Economic and Financial Indicators, 2015–19 (as reported)
- Header years: 2015 2016 2017 2018 2019 (Est./Proj. context implied)
- Output and prices
- Real GDP: 6.5 6.2 6.3
- Real hydrocarbon GDP: 0.1 -4.8 1.7 5.4 6.6
- Real nonhydrocarbon GDP: 9.4 11.4 7.2
- Consumer prices (end of period): 6.0 10.4 9.0
- Consumer prices (period average): 7.4 3.6 8.0 13.2 13.4
- Investment and savings
- Gross investment: 47.3 47.0 40.8 28.2 29.2
- Of which: State budget: 2.8 1.5 1.9
- Gross savings: 31.7 26.8 30.5 33.9 28.8
- Fiscal sector
- Overall fiscal balance 1/: -0.7 -2.4 -2.8 -0.2
- Revenue: 16.6 11.7 14.9 13.5 13.0
- Expenditure: 17.3 14.1 17.8 13.7 13.3
- Domestic government debt: 1.0 3.7 3.2
- Total public debt 2/: 21.8 24.1 29.1 30.4
- Monetary sector
- Credit to the economy 3/: 27.4 27.7 14.7 17.0
- Credit to GDP ratio: 45.5 55.9 62.5 64.8 66.4
- Broad money, incl. foreign currency deposits at CBT: 16.1 8.4 8.6
- Real effective exchange rate: 0.6 8.8 5.0 …
- External sector
- Exports of goods (In millions of US$): 12,164 7,520 7,788 9,239 9,670
- Imports of goods (In millions of US$): 14,051 13,177 10,189 5,094 7,397
- Current account balance: -15.6 -20.2 -10.3 5.7 -0.4
- Foreign direct investment: 4.0 3.3
- Total public sector external debt: 23.1 25.1 25.4 27.2
- Memorandum items:
- Nominal GDP (in millions of manat): 125,299 126,630 132,742 142,664 162,836
- Nominal GDP (in millions of US$): 35,800 36,180 37,926 40,761 46,524
Press Release No. 19/112, April 10, 2019. IMF Communications Department.