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.


  • 4th largest natural gas reserves in the world (9.3%)
  • Moderate level of debt
  • Healthy public accounts


  • Small landlocked economy
  • Porous Afghan border; limited military resources
  • Economy highly dependent on the hydrocarbon sector (mainly gas) and China, which imports almost all of these fuels
  • State interventionism and problems in governance (corruption, authoritarianism) and investment management; opaque statistical system
  • Small private sector (30.7% of GDP in 2016)
  • Severe foreign exchange market restrictions and manat overvaluation are harmful to FDI and trade

Current Trends

Reduced but still crucial dependence on Chinese gas purchases

The Turkmen economy will continue to benefit in 2020 from the resumption of gas supplies to Russia, which began in April 2019 after a two-year hiatus. Construction of the fourth part of the Central Asia-China gas pipeline has begun: this will make it possible to overcome the network’s flow constraints, which will soon be reached, and to supply a market whose gas consumption could double by 2050. Most of the diversification efforts will take place in the petrochemical sector: the new Ahal natural gas processing plant (USD 1.7 billion), inaugurated in June 2019 and financed by Japanese banks, will add petrol meeting Euro-5 standards to the Turkmen export basket. An agrarian reform aimed at boosting productivity is planned and will enable land to be leased to producers over 99 years. Producers will be able to cultivate 30% of their farm for their needs, while the rest will be dedicated to plantations assigned by the State. Production will be reoriented, with cotton replacing wheat, and both expected to be reduced in 2020 (from 1.5 million tonnes to 1.25 million tonnes in the case of cotton). The new seven-year plan includes an ambitious irrigation investment plan, which will improve the productivity of some land. According to local sources, the situation in the livestock sector is deteriorating, with a lack of food forcing cuts to herds. The construction sector will benefit from the recovery in public investment, particularly residential investment, with a new city project near the capital.

Credit is mainly directed to state-owned enterprises and distributed at concessional rates, with more favorable terms for agriculture. The ratio of non-performing loans remains relatively low. Credit policy should continue on a flexible path. Household demand will be squeezed by high inflation linked to import restrictions and the withdrawal of many social spending items and subsidies.

Resumption of public investment and import substitution

On the public finance side, the reduction in hydrocarbon revenues was offset by cuts to social and investment spending in 2019. The government plans to cover future deficits through bank financing and aims to reduce the non-hydrocarbon budget deficit from 6.2% of GDP in 2018 to 4% in 2024. Turkmenistan’s need for infrastructure, the highest in the region, accounts for the increase in public investment in 2020.

Exports increased in 2019, largely due to Chinese purchases (+18%). Despite Gazprom’s return, China still accounts for 78% of Turkmen exports. The current account will therefore be vulnerable to a potential Chinese slowdown or diversification of Chinese supplies, which could alter the terms of trade, as well as to changes in energy prices. Turkmen textiles are enjoying positive momentum. The import substitution strategy, which targets the food, textiles and building materials sectors, could have a positive impact on the trade balance in 2020, in particular by restricting food imports. Capital openness is low, with the exception of FDI, which is concentrated in hydrocarbons.

An unfinished political and economic transition

In power since 2006, President Gurbanguly Berdymuhamedov is now serving his third consecutive term. The 2016 constitutional reform raised the age limit for presidential candidates, allowing the President (62) to seek a fourth term in 2021. Despite the total domination of his Democratic Party, the President recently reshuffled his cabinet and announced plans for constitutional reform, aimed at giving more power to the legislature, perhaps reflecting an awareness on the part of the executive. The situation of ordinary people is being made more difficult by budget cuts. Free public services have been scrapped and there are regular shortages of basic foodstuffs in government-regulated shops, despite the rationing arrangements. The harsh security policy prevents large-scale demonstrations, and the government has banned men under 40 from leaving the country to stem the hemorrhage of emigrants over the past ten years, whose scale is difficult to estimate.

Relations with neighboring countries seem to have calmed, with Turkmenistan declaring diplomatic neutrality in 1995. However, major gas infrastructure projects are being hampered by its partners. Russia and Iran are opposed to the creation of the Transcaspian gas pipeline, while the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project has not started, amid disagreements over gas prices, insufficient financing and uncertain security conditions. The Afghan border remains problematic, due to the presence of the Taliban and limited military resources. Turkmenistan is the lowest-rated country in Central Asia on all EBRD transition indicators. The business climate is extremely difficult given the public sector’s dominance, economic monopolies and trade, price and currency controls


Coface (02/2020)