This works just fine:

   {% image '@TestBundle/Resources/pic2/image.jpg' %} 
       <img src="{{ asset_url }}" alt="Example" />
   {% endimage %}

but I need to make it more dynamic by displaying the name of uploaded image instead of image.jpg. I need somehow to concatenate the asset with {{ entity.picture }}

Is there any way to do this in twig without getting an error of course?

{% image '@TestBundle/Resources/pic2/' . {{ entity.picture }} %}  

You can try this:

// config.yml add a global variable (Or just assign the path from the controller)
twig:
    globals:
        imagepath: "your/path/to/thepictures/"

I don't this this works in twig since this image is used for assets optimization:

{% image {{ imagepath ~ entity.picture }} %}  

So an alternative can be:

<img src="{{ imagepath ~ entity.picture }}">