Turkmenistan - Overview of economy

Turkmenistan is one of the most politically conservative and impoverished of the former Soviet republics. It has made little progress toward restructuring its economic foundation. Between 1991 and 1998, Turkmenistan's economic activity plummeted 45 percent. Its economy is agricultural, accounting for almost half of the gross domestic product (GDP), primarily marked by livestock raising and cotton production. Prior to independence in 1991, Turkmenistan was the second-largest cotton producer in the Soviet Union (behind Uzbekistan) and tenth largest in the world. It produces more cotton per capita than any other country in the world. Turkmenistan has the world's fifth largest reserves of natural gas and considerable oil resources. Turkmenistan is also known for subtropical fruits, melons, and nuts, especially pomegranates, figs, olives, and almonds.

Since gaining independence in 1991, Turkmenistan's government has emphasized grain production to increase its self-sufficiency and to limit Russian influence. The government has taken a cautious approach to economic reform, though. In 1992 the government of President Saparmurat Niyazov introduced his Ten Years of Prosperity program, which provided for Soviet-style subsidies for natural gas, electricity, and drinking water to all households in the republic. The program was afterwards modified to Ten Years of Stability, yet continues to subsidize for social needs, accounting for almost 60 percent of the state budgetary expenditures.

In the 1970s the Soviets made major investments in oil and gas production in Turkmenistan. By 1992 gas

production accounted for almost 60 percent of GDP. Combined with the failure of trading partners to make payments, Russia's refusal to allow Turkmenistan gas transportation through its territory resulted in reduced output by more than 40 percent, mounting debts, and a sharp decline in overall industrial production. Turkmenistan continues to rely upon its abundant natural resources and cotton production to sustain its inefficient and declining economy.

Sources differ greatly on Turkmenistan's macroeconomic indicators since 1991. Government figures are often inflated to provide a more positive picture. Unemployment statistics for Turkmenistan are unreliable, but according to government sources in 1997 it was 5 percent. Real wages have declined by 25 percent since 1997 and inflation , which peaked in 1993 at more than 3,000 percent, dropped to 30 percent in 1999. The chief reason for the economic collapse was the failure of Russia, Ukraine, and other central Asian republics to pay for goods. In addition, the decline in energy prices hurt the economy.