Since the 1990s, only 10 countries in the Europe and Central Asia (ECA) region have achieved high-income status. In contrast, other ECA middle-income countries (MICs), including Turkmenistan, have made little progress on market reforms and remain trapped in the middle-income category.
To shift to a path to high-income status, Turkmenistan needs to make advancements in domestic structural reforms, notably, to reduce state control and establish and promote competition policies in the economy.
The World Bank’s Europe and Central Asia Economic Update (Spring 2025) highlights that regional growth in Europe and Central Asia (ECA) remained broadly unchanged at 3.6 percent in 2024, and it is projected to slow significantly to 2.5 percent on average in 2025-26. According to the report, the deceleration of economic growth in ECA is relative to the downturn of the EU economy as its region’s most significant trading and investment partner, as well as the persistent effects of the COVID-19 pandemic, the 2022 cost-of-living crisis, and the impacts of Russia’s invasion of Ukraine.
Key insights for Turkmenistan
Turkmenistan is among the ECA countries expected to take decades to reach the high-income GNI threshold of $14,005 in per capita income, the current benchmark. This prolonged path in the country reflects systemic internal economic constraints such as limited market competition, high regulatory barriers, and state dominance in major economic sectors, including exports, oil and gas, electricity, cotton production and ginning, telecommunications, and most manufacturing. Coupled with these constraints, the global shocks hinder Turkmenistan’s accelerated development to close the gap with high-income economies.
Source: World Bank ECA Economic Update Spring 2025
An analysis of market-based competition among middle and high-income economies in ECA countries reveals that Turkmenistan stands out as being at the very bottom with the lowest market organization score. This score shows a weak foundation for market-based competition and unstable competition rules, which challenge start-ups and entrepreneurs from entering the market and driving innovation.
Similar issues with market organisation and competition are present in other Central Asian countries, such as the Kyrgyz Republic, Tajikistan, Uzbekistan, and Kazakhstan, which also have relatively low scores. But Kazakhstan appears with one of the highest product market regulation indicators among ECA middle-income countries (MICs).
Source: World Bank ECA Economic Update Spring 2025
How to escape the middle-income trap?
The report provides two recommendations to the ECA middle-income countries to reach high-income status:
- To transition from an investment-driven strategy to one augmented by the importation and diffusion of global capital, technology, and knowledge.
- To integrate the innovation dimension as a key growth driver.
Reforms agenda for Turkmenistan:
- The adoption of policies that promote pro-competition reforms in the market, enabling business dynamism, and include policy measures to reduce or remove restrictions on trade and domestic or international financial transactions.
- The establishment of economic structures and institutions that accumulate human and physical capital, infuse fresh expertise and technology, and implement innovations that expand the frontier of products and processes.
