IMF Forecasts 2.3% Growth in Turkmenistan’s Economy

In her report on the International Monetary Fund (IMF) mission to Turkmenistan, from 27 March – 9 April, Ms. Anna Bordon announced that Turkmenistan’s economy is set to expand by around at 2.3% in the coming year. According to the IMF mission’s assessment of the economic outlook and risks of Turkmenistan’s macroeconomic and financial developments, the country’s economic activity moderated in 2023 and inflation is on the rise. IMF staff estimate that post-pandemic growth surged to 5.3% in 2022 before falling to 2% in early 2023 as world commodity prices subsided, monetary policy tightened, and pressures on exchange rates abated. A temporary situation, inflation began to pick up later in 2023 and is projected to gradually rise to 8% mainly due to the country’s policy to increase public sector wages and pensions by 10% per year. “To improve spending efficiency, Turkmenistan should enhance its targeting of social spending, move toward public wage increases based on performance, and enhance public investment management,” said Ms Borden. The IMF estimates that growth of hydrocarbon production will stabilize at around 2%. In contrast, non-hydrocarbon growth is expected to remain subdued, given the challenging geopolitical and business environment, investment inefficiencies, the significant overvaluation of real exchange rates, and burdensome standards imposed by international regulations. The end of mission statement concluded: “The authorities are adequately focused on economic diversification. A more market-based economic diversification strategy would be preferable. Sustained macroeconomic stability is a pre-requisite for diversification, which importantly requires adjusting the exchange rate and eliminating exchange restrictions.” It was also recommended that Turkmenistan “gradually phase out administrative controls and reduce the footprint of the state in the economy”.