Country Risk Rating

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. - Source: Coface

Business Climate Rating

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, but tenth largest producer
  • Significant currency reserves
  • Low debt ratio


  • Small landlocked economy
  • Porosity of border with Afghanistan, while military resources are weak
  • High dependence of the economy on the hydrocarbon sector (mainly gas) and on China, a quasi-exclusive export market
  • State interventionism and gaps in governance (corruption, authoritarianism)
  • High unemployment (60%) and rural self-sufficiency 

Current Trends

Growth Based on Gas Exports to China

Gas exports (53% of GDP) are expected to benefit from China’s increased demand for this fuel. Volume growth is expected to outweigh any further price decline. Investment (half of GDP), both public and foreign, and concentrated in hydrocarbons, should maintain its momentum and is set to benefit from the construction of a gas pipeline to Pakistan and India through Afghanistan (TAPI), and eventually that of a third conduit to China. Public consumption (9% of the GDP) stagnated in 2017 due to the need to reduce public spending following the exorbitant cost (USD 8 billion) of investments made to host the Asian Indoor Sports and Martial Arts Games. It should resume timidly in 2018.

Household consumption (11% of the GDP) was heavily affected in 2017 by several factors: the elimination of the free supply of gas, electricity, and water in force since 1993, the increase in the price of basic food products (fruits and vegetables, rice and sugar), a decline in public salaries, and layoffs in the public sector. Despite this, household consumption should also resume in 2018. However, a further devaluation of the manat (the local currency), possible given its strong overvaluation (in October 2017, its exchange rate with the dollar on the black market was twice the official rate), would cause a new surge of imported inflation, especially for food products, unfavorable to consumption.

Maintaining a Balanced Budget at the Cost of Savings

The decline in the price of gas, which generates 80% of budget revenues (12% of the total GDP), and the successive defections of buyers from Russia and Iran, even largely offset by the increase in Chinese demand, forced the Turkmenistan government to reduce the state’s expenses in order to safeguard the balance of its accounts. The adjustment was all the more severe, as spending on hosting the Asian Games took a heavy toll. The cuts made concerned subsidies, wages, and public sector employment, and also investments to promote the diversification and substitution of domestic production for petrochemical, mining and agri-food imports. The sale of public companies, which are inefficiently managed, could encompass petrochemical complexes, shopping centers, textiles, livestock and the dairy industry. The assets of the Stabilization Fund, the amount of which is not communicated by the authorities, give the State a certain level of flexibility, at least in the short term, especially as the public debt remains low.

Despite the trade surplus, a current account deficit is difficult to finance

Thanks to hydrocarbon sales (80% of total exports, ahead of cotton/textile and oil, each at 10%), the country has a trade surplus equivalent to 17.8% of the GDP (2016). 80% of gas sales are destined for China, meaning that there is an extreme sensitivity to the price of gas and Chinese demand. Imports, which are concentrated in capital goods destined for the hydrocarbon sector, are traditionally inferior and are further affected by the postponement of certain investment projects, lower consumption, and the reintroduction of customs duties. However, imports of services for the exploitation of hydrocarbon fields, as well as the outflow of dividends from foreign investors, are leading to a current account deficit, financed in part by FDI centered on hydrocarbons. A withdrawal from the reserves will likely be made to finance the balance. In order to reduce the drain, authorities are trying to restrict non-essential imports by increasing taxation, controlling access to foreign exchanges, and reducing liquidity and the place of cash in the economy. However, there comes a time when the only way out, if the government wants to avoid the use of external debt (22% of the GDP), is to devalue.

Precarious Security Situation at the Afghan Border

The security situation is fragile at the border with Afghanistan because of the presence of the Taliban. President Gurbanguly Berdymukhamedov was re-elected for a third term on the 12th February 2017, with 98% of the vote. The multi-party system introduced in January 2012 did not change the grip of his party (Democratic Party) in the legislative elections at the end of 2013. In September 2016, President Berdymukhamedov (60 years old) endorsed a constitutional amendment that allows him to remain at the head of the country without an age limit (previously set at 70 years of age), and to extend the term of office of the President from five to seven years. Lower subsidies may increase public discontent, but a very strict security policy limits the risk of large-scale movements.

According to the World Bank’s governance indicators, Turkmenistan is one of the worst-ranked countries in the CIS. The country ranks 192nd (out of 205) in the fight against corruption, and ranks 205th in terms of the quality of regulations. The business climate remains very difficult due to the dominance of the public sector and its monopolies over the formal economy, control over trade and prices, and the difficulty associated with obtaining reliable data.


Coface (01/2018)