Higher oil revenues to boost Turkmenistan's GDP growth - Fitch

Finance 20 January 2022 09:43 (UTC +04:00)
Higher oil revenues to boost Turkmenistan's GDP growth - Fitch

BAKU, Azerbaijan, January 20

By Amina Nazarli - Trend:

Turkmenistan's GDP is expected to grow by 3.5 percent in 2022, according to Fitch, as the economy benefits from higher energy revenues, Paul Gamble, Head of Emerging Europe Sovereign Ratings at Fitch Ratings told Trend.

“Our projection is broadly in line with external assessments of medium-term growth, although this is subject to significant uncertainty depending on the course of economic reform. We note that officially recorded economic growth has been remarkably stable at around 6 percent,” he said.

Gamble noted that the external position should improve owing to higher gas revenues and the completion of the repayment of a large foreign loan.

“The extent of the improvement depends on how the authorities respond to the stronger external position. Additional capital spending, which would put pressure on imports of goods and services, is one risk. If the resources are not spent, the balance between easing domestic supply constraints (thereby reducing the parallel market premium) and building reserves is unclear,” he explained.

Beyond the external sector, according to the head of emerging Europe sovereign ratings, public finances will benefit from higher energy revenues and the completion of the loan repayment.

“Again, the extent of the improvement will depend on how much of the additional revenue is used for new spending,” he added.

Regarding the Outlook for the rating, Gamble described it as “Stable”.

“The factors we have identified that could lead to positive rating action are an improvement in governance standards, the business environment and the availability and reliability of key economic data, likely underpinned by policies to open the economy, and an improvement in the credibility and consistency of economic policy that reduces macroeconomic distortions and enhances the capacity of the economy to absorb shocks,” he said.

In his words, the factors that could lead to a negative rating action are a significant deterioration in the public and external balance sheets driven, for example, by lower energy prices or disruption to key export contracts, and destabilizing political or geopolitical developments that have adverse impacts on the economy and sovereign balance sheet.