Azernews.Az

By Sara Rajabova

The economic downturn in Russia has negatively impacted Central Asian countries, which are heavily dependent on the Russian economy.

After Kazakhstan and Kyrgyzstan, the Asian Development Bank forecasted a drop in economic growth Turkmenistan for the next year.

“GDP growth in Turkmenistan is projected to slow to 9.7 percent in 2015 and 9.2 percent in 2016, reflecting lower public investment. Growth will slow further if external difficulties persist and require fiscal adjustment,” said a new ADB report, Asian Development Outlook 2015.

Inflation is forecasted to reach 7.0 percent before subsiding to 6.5 percent, according to the report.

The report said with hydrocarbons representing more than 90 percent of exports, the continued decline in energy prices and fluctuating demand for Turkmen gas will likely reduce export revenues, weakening the economy.

However, Turkmenistan has strong external buffers, as the International Monetary Fund estimated its foreign exchange reserves equal to 22 months of imports in 2014. Moreover, breakeven petroleum prices for the fiscal and external balance are considered to be the lowest in the region, providing some insulation against fluctuating energy prices.

The government devalued the Turkmen manat on January 1 by 19 percent to 3.50 manats per dollar from the previous 2.85, the first such adjustment in 7 years. The move was intended to keep non-energy exports competitive, ease pressure on the currency from falling energy prices, and offset some of the 40 percent appreciation against the ruble during the second half of 2014.

Along with further price increases for gasoline and public utilities, the devaluation will likely spur inflation to 7.0 percent in 2015 before slowing to 6.5 percent in 2016, according to report.

“To limit inflation, the government will continue its import-substitution policies and price administration. The Central Bank of Turkmenistan will likely tighten monetary policy by slowing credit expansion. Growth in the money supply is forecast to slow to 19.0 percent in 2015 from 22.6 percent in 2014,” the report said.

The state budget for 2015 is planned to be broadly balanced and anticipates a 9.5 percent rise in spending and a 13.0 percent increase in revenues.

The report however anticipated that the economy will recover slightly in 2016. The current account deficit is forecasted to widen to 8.4 percent of GDP in 2015 before narrowing to 6.2 percent in 2016. External debt will remain low, decreasing to 18.6 percent of GDP in 2015 and 16.4 percent in 2016 as earlier loans are repaid.

The government reported growth in 2014 at 10.3 percent, slightly above 10.2 percent a year earlier. The large hydrocarbon sector grew by 6.1 percent, while the rest of the economy expanded twice as fast, by 13.0 percent, according to the report.

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Sara Rajabova is AzerNews’ staff journalist, follow her on Twitter: @SaraRajabova

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