Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax system
Basic data
Although Turkmenistan has a new president from March 12, 2022 – Serdar Berdimuchammedov (son of the previous authoritarian president Gurbanguly), no significant change in economic policy is expected in the near future. Despite the closedness of the country, the economy is affected by developments in world markets, the Covid-19 pandemic, the conflict in Ukraine and other global trends. The Turkmen economy is based on intensive agriculture in irrigated oases, significant oil resources and natural gas reserves (4th in the world by reserves). The business sphere is dominated by state monopolies.
All statistics and figures about the performance of Turkmenistan’s economy differ greatly. While according to international organizations, the country’s GDP growth in 2021 was at the level of 3.5%, Turkmen statistics indicate almost double (6.2%). Average inflation in 2021 reached a value of 15.2% (international data), according to Turkmen figures it was only 12.5% (according to American sources, 21%). The increase in inflation was preceded by a rapid weakening of the Turkmen manat against the USD (due to the Russian-Ukrainian war) and a subsequent increase in the prices of imported goods. Rising inflation is also associated with limiting currency conversions and increasing the price of imported products as well as domestic products, the production of which depends on imported materials. To ensure food security, state stores supplied residents with rations of basic foodstuffs (vegetable oil, chicken meat, flour, eggs and sugar) at subsidized prices.
According to cheeroutdoor.com, the country is relatively active in foreign trade, at the beginning of 2022 exports to China grew mainly, but it is possible to expect problems associated with the sanctions imposed on Russia (reduction in the volume of remittances of Turkmen workers in Russia, reduction in the import of Turkmen gas to Russia, etc.)
In March 2022, the OPEC Fund for International Development approved a USD 45 million loan to Turkmenistan to finance a merchant fleet construction project to increase Turkmenistan’s transportation capabilities in the Caspian Sea.
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | 3 | -1.1 | 3.5 | 3.1 | 3 |
| GDP/population (USD/PPP) | 13,950.00 | 13,800.00 | 14,560.00 | 15,220.00 | 15,890.0 |
| Inflation (%) | 15 | 15.4 | 15.2 | 14 | 13 |
| Unemployment (%) | 4.3 | 5 | ON | ON | ON |
| Export of goods (billion USD) | 10.4 | 7.5 | 9 | 10.6 | 12.4 |
| Import of goods (billion USD) | 3 | 1.4 | 4 | 4 | 4.1 |
| Trade Balance (Billion USD) | 7.4 | 3.3 | 5 | 6.6 | 8.4 |
| Industrial production (% change) | ON | ON | ON | ON | ON |
| Population (millions) | 5.9 | 6 | 6.1 | 6.2 | 6.3 |
| Competitiveness | ON | ON | ON | ON | ON |
| OECD export risk | 07.VII | 07.VII | 07.VII | ON | ON |
Source: EIU, OECD, IMD
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | -0.5 |
| Public debt (% of GDP) | 27% |
| Current account balance (billion USD) | -2.3 |
| Taxes | 2022 |
| AFTER | 8% / 20% |
| F.O | 10% |
| VAT | 15% |
According to data from the Asian Development Bank, government expenditures reached 12.0% of GDP in 2021, revenues – 11.5%, and the budget deficit averaged -0.3% of GDP. Public debt decreased to 27.0% of GDP in 2021 from 32.2% of GDP in 2020 due to high external loan repayments. The inflow of foreign direct investment in 2020 reached USD billion. Gross foreign debt amounted to 8% of GDP at the end of 2021.
The current account is buoyed by a recovery in gas export volumes and prices, as well as the fact that a large off-take contract loan to China was repaid on schedule last year. A current account surplus of 1% of GDP was recorded for the January-September 2021 period, thanks to higher hydrocarbon revenues. The delayed carryover enshrined in hydrocarbon export contracts means that further increases in exports are expected in 2022. Fitch Ratings has forecast current account surpluses of 4.5% of GDP in 2021 and 2.4% in 2022, reflecting oil price forecasts and a steady increase in imports.
On the World Index of Economic Freedom, Turkmenistan scored 4 points, which ranks it as high as 165th on the Index of Free Economies in 2021. Turkmenistan ranks 38th (ahead of North Korea) in the Asia-Pacific region, and its overall ranking is below the regional and the world average. In the absence of a strong private sector and economic freedom, the state maintains monopoly control over the entire economy.
Banking system
The Central Bank of Turkmenistan fulfills the classical role of the central bank in the system. Commercial banks are divided into two basic groups:
State banks:
- State Bank for Foreign Economic Affairs of Turkmenistan
- State Development Bank of Turkmenistan
- State Commercial Bank “Turkmenbashi”
- State Commercial Bank “Turkmenistan”
- State Commercial Bank “Halkbank”
- State Commercial Bank “Prezidentbank”
- State Commercial Bank “Dajchanbank”
Joint-stock commercial banks:
- Joint-Stock Commercial Bank “Senagat”
- Joint-stock commercial bank “Rysgal”
- International Joint Stock Bank “Garagum”
- Turkmen-Turkish joint-stock commercial bank
- “Saderat Iran” bank branch
In August 2021, Fitch Ratings assigned Turkmenistan a long-term credit rating of B+, but expressed doubts about the reliability of the country’s official GDP data. The sovereign risk score improved by 2 points to 57 in the EIU’s October 2021 assessment, moving the rating to the middle of band B. The improvement was driven by an acceleration in real GDP growth and a return to a current account surplus. Low foreign debt obligations and large foreign exchange reserves further support the rating. However, a questionable commitment to pay and insufficient data prevent a higher score. The sector is dominated by state-owned banks, with 91.4% of bank equity held by the State Development Bank of Turkmenistan and other state-owned banks.
The state’s economy is highly dependent on gas exports to China and is vulnerable to fluctuating energy prices and Chinese demand. Attempts to diversify gas export markets through the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline and the proposed Trans-Caspian pipeline are unlikely to succeed in the short term.
Tax system
The tax system in Turkmenistan recognizes the following types of taxes:
- corporate income tax – 8% for residents and 20% for state and foreign companies
- income tax of natural persons (staying in Turkmenistan for 183 days or more) – 10%
- value added tax 15%.
- pension insurance contributions
- withholding taxes for payments abroad
- other taxes: real estate tax, mineral wealth extraction tax, consumption tax, advertising tax, parking tax, car sales tax, contribution to the State Agricultural Development Fund
- contribution to the Ashgabat Development Fund
Residents are generally taxed in Turkmenistan on their worldwide income, including benefits in kind such as food, housing, relocation, etc. Non-residents are taxed in Turkmenistan only on their income from Turkmen sources (eg from their activities carried out in Turkmenistan). Personal income tax is generally collected by withholding at source, where payment is made by withholding agents (ie resident legal entities, permanent establishments of non-resident legal entities). This does not apply to business income of natural persons of entrepreneurs who are obliged to apply self-taxation.
