Fitch Ratings 2024: Turkmenistan has a Positive Outlook

Fitch Ratings assigned Turkmenistan a “B+” rating with a Positive Outlook in its latest report released in February 2024, which mirrors the rating given in August 2023. Fitch’s rating scale ranges from “AAA” as the highest to “D” as the lowest. In both 2022 and 2021, Turkmenistan received a “B+” rating with a Stable Outlook. The shift from a “Stable” to a “Positive” Outlook in 2023 was driven by increased gas prices, resulting in higher income from gas exports for the country.

The report by Fitch Ratings outlines the primary strengths and weaknesses contributing to Turkmenistan’s “B+” rating. Among the notable weaknesses are its weak governance, opaque economic policies, including the parallel exchange rate system, limited economic diversification, challenging business environment, and heavy dependence on natural resource exports.

On the positive side, Turkmenistan boasts a sound sovereign balance sheet and possesses the world’s fourth-largest gas reserves. Compared to its peers with a “B” rating, Turkmenistan exhibits the lowest public debt and the highest sovereign net foreign assets per GDP.

Progress has been noted in Turkmenistan’s accession process to the WTO, though Fitch expects full membership “would be to a long-term timetable, even with strong political commitment”.

  • GDP: Fitch predicts a GDP growth rate of 2.3% in 2024 and 2.1% in 2025, in contrast to the government’s reported figure of 6.3% in 2023. This growth is projected to be driven by increased public investment, particularly in the second phase of the Arkadag “smart” city project, and advancements in downstream energy products and transportation corridors.
  • Inflation decreased to 1.4% by the end of 2023, a decline from 3.0% in 2022 and a significant drop from 21.1% recorded in 2021. Factors contributing to this decline include reduced supply-chain disruptions, increased domestic food production, lower international prices, and continued control of administered prices. However, Fitch anticipates inflation to rise to an average of 7% in 2024-2025 as temporary disinflationary factors dissipate.
  • Governance: Turkmenistan ranks low on the World Bank Governance Indicators (WBGI), falling within the 11.5th percentile globally, meaning it is in the lowest 11.5% of the countries worldwide in terms of the governance. This indicates poor governance characterized by centralized power and unfavorable assessments by the World Bank across various metrics such as voice and accountability, regulatory quality, rule of law, and control of corruption.
  • Public debt decreased from 10% of GDP in 2021 to 4.3% by the end of 2023, with Fitch projecting a further decrease to 3.5% by the end of 2025. The Turkmenistan Stabilization Fund (TSF), denominated solely in local currency, grew by 5.5 billion TMT in 2023, reaching 32 billion TMT, of which 17.2 billion TMT (6.1% of GDP) constitutes fiscal reserves held at the central bank.

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