As an international trade fair opened this week in Ashgabat, slower economic growth moderated prospects for the Turkmenistan economy for the coming year.
Joyce Chang, emerging markets economist at JPMorgan in London, in a note published on Monday said that the country was trying to diversify its economy but was still 'too dependent on energy exports'.
Foreign investment is helping Turkmenistan achieve that goal. On Oct. 23, Japanese Prime Minister Shinzo Abe announced that his country would invest $18 billion in infrastructure projects in Turkmenistan.
On Oct. 30, Turkmenistan’s state gas company Turkmengaz announced plans to start construction on its section of the Turkmenistan-Afghanistan-Pakistan-India pipeline in December.
Turkmengaz, Afghan Gas Enterprise, Inter State Gas Systems (Pakistan) and GAIL (India) are all equal shareholders in the pipeline company which will build, own and operate the network.
With investment of this type, the economy of Turkmenistan continues to grow, but growth is slowing as the recession in Russia hurts exports, and low oil and gas prices limit revenue from its primary exports, according to a report published by the Asian Development Bank (ADB) at the end of September.
Oil and gas account for 81 percent of Turkmenistan's exports, and about 40 percent of its GDP, the report noted.
The drop in oil and gas sales is expected to cut growth for the Turkmenistan economy this year, to 9.7 percent in 2015 from 10.23 percent in 2014, according to a forecast by the International Monetary Fund in April.
Growth is projected to slow further, to 9.5 percent in 2016, despite a prospective rebound of energy prices.
“But growth in Turkmenistan was also driven by industrial expansion, with 12.1 percent contributed by agriculture and 11.6 percent input from services,” the ADB report said.
“Turkmenistan can grow a dynamic private sector, to help the country grow, creating jobs and encouraging integration with other markets,” the World Bank said in a note published on Nov. 2.
Key to change in the country’s economy is the devaluation of its currency, the manat, which the central bank made on Jan. 1. The scale of the devaluation was at about 19 percent.
Writing at the time, think tank Eurasianet, said: “It comes as all Central Asian economies are feeling the downturn in Russia, where the ruble lost 45 percent of its value against the dollar in 2014. Noting that a liter of popular 95-octane petrol had also jumped overnight – from TMM 0.62 manats to 1 – there are concerns that significant inflation would follow.
According to Chang 'the government also devalued the manat strategically to help the country diversify trade'.
The lower-valued manat makes Turkmen products more competitive in Russia, despite the cheap ruble.
With the manat devalued, the Turkmen central bank has moved to limit inflation in the first half of 2015.
'Despite some food price increases, price controls have effectively restrained inflation,' according to the Asian Development Bank report.
The inflation forecast for 2015 is for 10 percent annually, and inflation is expected to rise to slightly above 10 percent in 2016, according to the bank.
All of this has led, however, to tougher conditions for consumers. In 2014, the government cut all energy and food subsidies for households. Now, after the devaluation, import prices have soared, and so many consumers cannot buy everything they need.
The government is looking into import substitutions as a means to improve lifestyles for consumers.
Investment, however, in the country's economy is growing, according to the IMF. Increasing domestic and foreign investment, along with rising hydrocarbon prices, are expected to boost the economy in 2016 and 2017.
By Andrew Jay Rosenbaum
Anadolu Agency
enerji@aa.com.tr