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 highest possible risk in terms of business climate. Due to a lack of available financial information and an unpredictable legal system, doing business in this country is extremely difficult.


  • Fourth largest natural gas reserves in the world (nearly 10% of the total)
  • Strategic position in Central Asia and between China on the one hand, and Russia and Europe, via the Caspian Sea, on the other
  • Healthy public accounts and a moderate level of debt
  • Obtained observer status at the World Trade Organisation (WTO) in July 2020, with the intention of commencing accession negotiations by 2025


  • High dependence on hydrocarbons (93% of exports, of which 83% gas), while the levers for export growth remain constrained
  • Strong dependence on China (which receives nearly 80% of gas exports)
  • Low share of private sector, anticompetitive market structures (State monopolies dominating the economy, credit and investment management)
  • Very difficult business climate, tight trade, price and foreign exchange restrictions and controls that hamper FDI
  • Poor infrastructure (especially transport and health) and underdeveloped regional connectivity
  • Weak governance (corruption, authoritarianism, repression, politicization of the judiciary, opacity of the statistics system)
  • Porous border with Afghanistan (presence of the Taliban) and weak military resources

Current Trends

Growth still driven by gas purchases from China

In 2020, Turkmenistan experienced a slowdown in its growth, which is expected to pick up again in 2021. While officially the country has no cases of COVID-19, unofficial sources indicate otherwise. Restrictions have been adopted, including restrictions on domestic and cross-border movements, which were already restricted prior to the pandemic. They have further compressed private consumption (50% of GDP) and services (48.5% of GDP). Household purchasing power, eroded by the elimination of many social expenditures, is being undermined by galloping inflation, pushed up by food prices, which are being temporarily controlled and are subject, among other things, to the effects of new import restrictions. The list of commodities subject to tariffs, which have been increased across the board, has been extended, and a commission has been established to direct imports of essential goods. These measures are in line with the import substitution policy initiated in recent years, for inputs in the chemical industries (10% of exports), but also for food via wheat, for which harvests were better than in 2019, and textiles via cotton (2%), whose production targets seem to have been met. This policy is expected to force a rebound in demand in 2021, while credit, which is poorly developed, is directed to state-owned enterprises and financial support measures for sectors and individuals affected by health restrictions are non-existent.

In 2021, growth in value and volume is expected to be driven by the recovery in gas exports, which began in the second half of 2020 with the rebound in Chinese purchases. They had plunged (-44% year-on-year in January-July 2020) due to the combined effect of lower prices and Chinese demand. Gas exports to Russia will continue under the contract signed in mid-2019 with Gazprom, although volumes are expected to be significantly lower than three years ago when trade was suspended (5.5 billion cubic meters (bcm) per year in 2019-2024). Export growth levers remain constrained, particularly to China, since delivery of the fourth branch ("line D") of the Central Asia-China gas pipeline, which is expected to double export volumes (to 65 bcm per year), has been delayed until 2022. The diversification of Chinese supplies, especially from Russia, could have an impact on the terms of trade, and will hardly be offset by the diversification of Turkmenistan's customers. The commissioning of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, which is expected to have a maximum capacity of 33 bcm per year, has been postponed from 2021 to 2023 after several disputes over gas prices, difficulties in completing financing (13.6% of GDP) and construction delays in Afghanistan. Private investment (36% of GDP) is expected to decelerate, while public investment is expected to make a positive, but small, contribution to growth, with the continuation of various construction projects, such as the 600 km highway linking the capital, Ashgabat, to Turkmenabat, near Uzbekistan (3% of GDP).


Tighter restrictions and exchange controls

The decline in gas export revenues widened the deficit in 2020, which is expected to narrow in 2021 as they rebound. The deficit is expected to be covered by domestic bank financing. The government is focusing on its program to digitalize public services by 2025, which is expected to guarantee an increase in tax revenues. Therefore, since August 2020, an online platform has been introduced to facilitate the processes regarding registration, tax returns and company liquidation.

Lower gas exports have reduced the current account surplus. Capital controls are strict, limiting FDI concentrated in hydrocarbons. The official exchange rate of the manat, largely overvalued, is expected to remain fixed, while the parallel exchange rate, much weaker, is estimated to have depreciated by 33% over January-September 2020. Access to foreign exchange at the official rate remains limited, and the decline in foreign exchange inflows has prompted the authorities to tighten exchange controls and import restrictions. They provide for restrictions on international payments and the impossibility for private companies to exchange their manat assets. As for public enterprises, they must pay 100% (previously 50%) of their foreign exchange earnings to the sovereign fund, which are exchanged at the official rate.


Cosmetic constitutional reforms

While the security policy was already severe, the pandemic was used as a pretext to restrict political freedoms. Social unrest remains unlikely, despite the disaffection with the government. President Berdymukhamedov, who has been in power since 2006 and was re-elected for seven years in February 2017 in an election that was neither free nor fair, retains, along with his Democratic Party of Turkmenistan, complete control over institutions. The transition from a unicameral to a bicameral parliament from January 2021 was adopted at the end of 2020. The upper house is expected to automatically approve the president's proposed candidates for key posts, and the lower house is expected to approve his proposed legislation. While the president has presented this reform as a strengthening of the legislature, it is mainly a strategy to consolidate his power and perhaps to guarantee the succession to his son. He could become president of the upper house, acting in the event of the incapacity or the death of the president.



Coface (02/2020)