The World Bank’s Turkmenistan Economic Report from December 2024 provides an overview of Turkmenistan’s economy, highlighting recent developments, key challenges and the outlook.
Some of the important shortcomings are summarized below.
Poverty and Social Protection
- Poverty data is lacking, making it difficult to assess the true extent of poverty. The UN estimated multidimensional poverty at just 0.2% in 2019, but no reliable international poverty line estimates exist.
- Social protection spending averaged 3.5% of GDP (2015 – 22), covering welfare benefits, pensions, and state subsidies, but remains modest relative to needs.
- Social assistance reach is limited with 10.9% of the vulnerable population receiving social assistance cash benefits (2021), 44.2% of the population covered by at least one social protection benefit (2021) and 52.6% of the employed population covered for work injuries (2019).
- Inflation surged from 6.5% (2019) to 21.1% (2021) due to global supply chain disruptions and relaxed domestic credit policies. Inflation dropped to 1.4% in 2023 but is projected to rise to 4.5% in 2025.
- Social benefits are not fully adjusted for inflation, eroding real incomes and impacting poverty.
- Turkmenistan maintains a dual exchange rate system, distorting the economy and hindering private sector development and investment.
- Currency conversion and profit repatriation are restricted, deterring foreign investors.
- Quote: “The prevailing dual exchange rate system is central to an unfavorable business and investment climate…This dual system, which implies significant rationing of foreign exchange at the official rate is a major impediment to businesses who rely on imports as part of their processes, and imposes significant distortions for capital repatriation abroad”.
- Public education spending averaged 3.7% of GDP (2015 – 22) – below regional (3.9%), upper-middle income countries (UMIC) (4.1%), and OECD (5.1%) averages.
- Turkmenistan has not participated in international assessments like PISA, limiting the ability to evaluate education outcomes.
- Challenges such as no recent data on learning outcomes, digital divide and lack of modern technologies in schools and mismatch between education and labor market needs persist.
- Public health spending averaged only 1.3% of GDP (2015 – 22) – lower than regional (2%), lower-middle income countries (LMIC) (1.5%), and UMIC (3.5%) averages.
- Infant mortality rate at 32.9 deaths per 1,000 live births (2022), compared to 9.8 in UMICs, signals poor health outcomes.
- Life expectancy at 71.8 years (2022) – below regional and income-group averages.
- Out-of-pocket health spending accounts for 75% of total health expenditure, indicating limited public healthcare coverage.
- Malnutrition and child health are improving but concerns remain as 7.1% of children under five suffer from stunting and the prevalence of wasting is 4.1% (2019).
- Quote: “Turkmenistan’s spending on health is lower than that of its regional peers. Its healthcare sector appears underfinanced, as suggested by high infant mortality rates and malnourishment”.
Employment
- Youth unemployment remains much higher than the national rate. Turkmenistan population growth (1.5% a year) has exceeded average employment growth (1.2%) for the entire period of 2010 – 22. While the national unemployment rate was 4.4%, youth unemployment was 10.6% in 2022.
- Quote: “The country’s economic structure, which lacks diversity and is heavily reliant on capital-intensive sectors such as hydrocarbons and chemicals, complicates the creation of high-quality jobs. These sectors often employ foreign specialists due to a local skills shortage, underscoring the need for training programs”.
IMPORTANT QUOTES FROM THE REPORT
“Despite abundant revenues from commodity exports, social sectors appear underfinanced, as suggested by lower state budget spending on healthcare as a percent of gross domestic product (GDP) compared to Turkmenistan’s income peers”.
“The financial sector serves primarily as a tool for the government to allocate credit to SOEs at concessional rates”.
“A dual exchange rate system contributed to an unfavorable business and investment climate… Profit repatriation is challenging and currency conversion is difficult (e.g., to repay loans, including to international financial institutions). Access to the official exchange rate is severely restricted by the CBT (Central Bank of Turkmenistan), usually to large and medium-size companies that have export revenue. Currency restrictions result in delays of three to six months in conversion”.
“Turkmenistan lags its neighbors and income peers in the creation of enterprises relative to its working age population. About 0.4 newly registered firms each year per 1000 people of working age population have been registered in Turkmenistan, compared to more than two firms in neighboring countries”.
“Turkmenistan is characterized by weak governance, as well as lack of transparency and accountability of the government in decision making and reporting macroeconomic data. Turkmenistan has laws and regulatory frameworks in place. However, the lack of independence and transparency of the judiciary, along with weak application of rule of law and regulatory quality is of great concern to private sector and foreign investors. Turkmenistan ranks consistently among the bottom 15 countries in the world in terms of Transparency International’s Corruption Perceptions Index in 2022”.
