An expert Yuri Aronskiy commented on the factors that had enabled Turkmenistan not to get bogged down in the ‘swamp’ of the crisis.
An economist, scientist, Chairman of the Union of Economists of Turkmenistan (UET), a representative of the Coordinating Council of the International Union of Economists, author and expert of CentralAsia.news, Yuri Aronskiy appeared on the pages of the information bulletin on January 16. He commented on the results Turkmenistan showed under severe epidemiological pressure in 2020 as an economic phenomenon in the year of crisis.
Some historical facts
Gross domestic product (GDP) is the primary macroeconomic indicator reflecting the total monetary or market value of goods produced and services provided in a country during one year. GDP can be expressed in two different ways: savings and expenditures. Savings primarily imply investment in the economy and construction of industrial, social and cultural facilities. Since gaining independence, there has traditionally been the high share of savings in Turkmenistan’s GDP. For example, the share of the construction industry in GDP has tripled since the 2000s, reaching almost 15% by 2013. Though this share decreased slightly due to global economic crises, now it is above 10%.
All these saving related resources enabled the country, firstly, to diversify the economy and transit from a resource model to an industry-resource model of development, and further to an industry innovation model, and, secondly, to increase GDP through accelerated construction of industrial facilities. As a result, the country moved rather quickly from the group of low-income countries to the group of upper-middle-income countries, according to the international country classifications by income level. Today, GDP per capita is over US$8,000, and over US$19,000 in terms of purchasing power parity (conditionally, what amount of goods and services can be bought for US$1).
What has enabled Turkmenistan to escape a severe crisis?
The global economy is currently going through difficult times. No sooner the countries started to recover from the economic crisis in 2015-2017 than a new global crisis, caused by the coronavirus pandemic with its social and economic impacts emerged in late 2019. The overwhelming majority of countries in the world have experienced severe recessions in a number of industries and seen GDP shrink by between 4%-12%.
International financial institutions forecast negative growth rates in 2020 for all developed and the most of developing countries, and near-zero growth rates levels for a small group of countries. However, today Turkmen economy demonstrates the very convincing annual growth rates. According to preliminary estimates, the GDP growth rate is 5.9% in 2020, which is slightly lower than in previous years. For other countries, the forecasts were consistent with reality and came true.
What are the factors that have enabled Turkmen economy to escape a severe economic crisis? First of all, the high investment share in GDP has been maintained over the past decades. This, along with tens of thousands of new jobs, made it possible to increase production significantly. By creating modern high-tech industries, the country started to process most of its resources (oil, gas, cotton, etc.) into export products, which are much more expensive on the world market than raw materials.
In December, President Gurbanguly Berdimuhamedov said that about 2,500 large industrial and social facilities totally worth over US$ 37 billion were under construction currently throughout Turkmenistan. Innovative industrial enterprises and infrastructure facilities are being created in all sectors, including thousands of kilometres of roads, railways, stations and airports. The country purchases modern airliners, agricultural machinery, etc. New facilities are expected to contribute to increasing GDP in a few years. Thus, the foundations laid for economic growth in previous years are producing long-term benefits for the country.
Multi-billion dollar manufacturing investment
Today, the country is able to maintain steady economic growth primarily through creating innovative industries in recent years, whose products are in great demand on world markets even in times of crisis. Such industries are many, ranging from small and medium-sized businesses to large-scale industrial enterprises with multi-billion dollar investment.
For example, a large reinforced concrete plant has been recently put into operation in Ahal velayat. With the aim of achieving the objectives of the state export promotion and import substitution programmes, the high-tech enterprises that produce building materials from local raw materials have been built and put into operation in all the regions of the country.
Several examples of the large industrial facilities built in recent years that significantly contribute to economic growth. Reconstruction and multi-billion dollar investment in the oil refineries enabled Turkmenistan to produce Euro 5 gasoline and a wide range of petroleum products and process more than half of oil produced in the country into in-demand products meeting international standards.
The world's first gas-to-gasoline plant, built near the capital city, Ashgabat, enabled the Turkmengaz State Concern to rise eco-friendly gasoline production 3.6 times and liquefied gas production by almost 20% in 2020. The plant created over 700 new jobs.
The role of the private sector
The role of the private sector in driving economic growth and increasing GDP should be noted, as it maintains the higher growth rates than the national average. According to preliminary estimates, in 2020, industrial output of the members of the Union of Industrialists and Entrepreneurs of Turkmenistan was about 13.5% and agricultural and food output growth –11.0%. As a result, the share of products and services of the private sector in GDP (excluding the oil and gas sector) increased from 66% to 71% in 2020.
Thus, the economic policy of Turkmenistan, aimed at sustaining substantial levels of public and private investment, produces positive results even in times of global crises.
