Turkmenistan: Risk Assessment

Country Risk Rating

D A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behavior. Corporate default probability is very high.

Business Climate Rating

D The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.


  • Fourth largest natural gas reserves in the world
  • Diversification of hydrocarbon export channels to China and Iran 
  • Substantial foreign exchange reserves
  • Low debt levels


  • Small, isolated economy
  • Poor economic diversification
  • Underdeveloped banking sector
  • State interventionism and difficult business climate

Current Trends

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Growth slowdown likely to be confirmed in 2016

In 2016, Turkmenistan is expected to continue to be affected by low hydrocarbon prices and the economic slowdown in China (its main export market). Public investment is likely to be revised downwards, although some projects should still be go ahead so as to meet the need for economic diversification. Meanwhile, major projects in the hydrocarbon sector (TAPI pipeline - Turkmenistan-Afghanistan-Pakistan-India) are expected to remain a priority, sustaining activity especially in the construction sector.

Household consumption will be hampered by a fiscal policy that is only modestly expansionary, with inflation likely to remain high. Price rises, fueled in 2015 by the consequences of the manat's devaluation early in the year, will continue strong in 2016. The cuts in subsidies on public services will maintain inflationary pressures. The fall in demand is however expected to prevent an acceleration of inflation.

The budget deficit, which appeared in 2015, is expected to deepen, while the current account deficit will remain high

In September 2015, the government announced measures aimed at controlling spending in the face of falling revenues resulting from the drop in prices for oil and gas (48% of State income in 2014). The completion of some of the projects under the National Program of Socio-Economic Development (PNDES) is expected to continue. Meanwhile, the government is unlikely to renege on wage rises, with household purchasing power already hit by the effects of inflation. But the rate of the rise (17% a year on average over the past five years) as well as of the increase in spending on public services (20% a year on average) could slow. Subsidies (electricity, water, gas) will also be cut. However, the assets in the Stabilization Fund provide the State with some leeway, at least in the short term, especially as the public debt is still fairly low.

Export income stems chiefly from hydrocarbon sales (95% of total), so the combined fall in prices and demand has a strong impact on the current account balance. Following Russia's decision in early 2015 to cut its imports of Turkmenistan gas, the country has had to contend with the drop in demand from China (80% of the country's exports). The Russian recession and the Chinese slowdown are expected to continue to put pressure on Turkmenistan's exports in 2016. However, increased refining capacity could sustain sales of refined products. Meanwhile, the need for imports, lower given the postponement of some projects and less lively domestic demand, should help prevent a further worsening of the current account balance. FDI flows in the energy sector, especially from Asian countries (Japan, South Korea), are set to continue. Faced with the ruble's sharp depreciation and falling export income, the monetary authorities had no choice but to devalue the manat by 19% in January 2015. Another devaluation in 2016 cannot be excluded, if the oil price continues to fall and the currencies of Turkmenistan's main partners (China, Russia, Turkey) continue to depreciate.

Unstable border security situation and persistent governance shortcomings

Relations with Azerbaijan seem to be easing despite a disagreement over the rights to hydrocarbon deposits in the Caspian Sea. The security situation, by contrast, remains very precarious on the borders with Afghanistan and Uzbekistan due to extremist Islamist movements, which are a potential source of instability.

President Gurbanguly Berdymukhamedov was re-elected in February 2012. The multiparty system introduced in January 2012 did not weaken his party's (Democratic Party) grip on power in the parliamentary elections of 2013. A constitutional amendment, intended to lengthen the presidential term of office from five to seven years and to abolish the age limit (70 years) for the office of president, could be approved in 2016, guaranteeing Berdymukhamedov (aged 58) a mandate for life.

Cuts in subsidies and the level of inflation could exacerbate popular discontent, but a very tight security policy limits the risk of mass protests. Turkmenistan is one of the worst ranked countries in the CIS according to the World Bank's governance indicators. Despite some progress, the company is in 191st place (out of 215) on the Corruption Perceptions Index and 194th’ on the rule of law. The business climate remains very difficult for foreign businesses.


Coface (09/2016)