The Midterm Exam for the Economy: Digest of Belarus Economy
On 19 July 2016 the National Statistic Committee of Belarus (Belstat) has announced the macroeconomic results of the first half of the year. The figures disappoint – economic growth still in the red zone.
Moreover, the Eurasian Development Bank has warned that the Republican budget requires additional cuts in order to sustain the acceptable level of state debt.
Finally, on 27 July 2016 the new round of Belarusian-Russian negotiations on gas prices and gas debt payment was held in Moscow.
Economic Growth: Leaving Plans for Christmas
In the first half of the year, the government planned to withdraw the economy from recession. However, actual results still dissatisfy. According to Belstat for the first half of 2016 GDP of Belarus has decreased in comparison with the previous year by 2.5 per cent and once again missed the official forecast this time by 2.6 per cent.
Such a reduction of economic growth still took place together with the weak domestic demand and demand from Belarus's major trade partners – the exports of goods dropped almost by fifth part accompanied by a significant slowdown in the growth of the physical volume of industrial production (see figure 1).
Meantime, Belarus' officials still have an optimistic view on the assessment of current macroeconomic situation. On 26 July 2016 the Prime Minister Andrei Kobyakov has announced that in the first quarter of 2016 the plan for creation of new jobs was exceeded by almost 2 times.
However, according to Belstat the number of work places in Belarus continues its reduction eight month in a row. In the first half of the year 341 thousands of Belarusians lost their jobs and outperform the number of employed by 81 thousands.
Additionally, the attraction of foreign investments in Belarus show little progress. For example, the number of new residents in the widely boosted Chinese-Belarusian industrial park "Great stone" still has not increased.
For two previous years the "Great stone" has attracted only eight residents and in the first half of the 2016 – zero. Moreover, only few currently registered residents began to implement the announced projects.
One of the main reasons that restrict the flow of foreign investments in Belarus tried to explain the British Ambassador in Belarus Fionna Gibb. She thinks that the Belarusian authorities do very little to overcome such situation. According to her, British companies avoid investment, because our country remains quite a closed country and business is not ready to take big risks.
State Debt: Resetting the Race
By the end of June the international reserves of Belarus increased by 7.3 per cent in comparison with first month of the year and amounted to $4.8bn (see figure 2). This number has already outperformed the official forecast for the whole year by $24m indicating the success of monetary policy realized by NBB in recent month.
However, this amount of international reserves remains at one of the lowest levels in recent years, which indicates that Belarus still possesses inadequate resources needed for the maintenance of its economy, and makes the problem of attracting additional capital not only from Russia still very difficult.
On the same time after two month of decline the state debt of Belarus has resumed its growth increasing by 7.4 per cent in comparison with the start of the year. The main source of growth falls on its external part taking into account the first $500m tranche of credit from the Eurasian Fund of Stabilization and Development.
However, in the second half of the year the internal part also will add up some additional pain. According to NBB since the beginning of year the volume of problem assets in banking system has increased by two times and reached 13.4 per cent growing already for eight months in a row – a historical maximum for the Belarus.
This situation occurred due to substantial granting of loans on preferential terms for mostly loss-making enterprises. In order to solve this problem the government will be forced to increase borrowings in the internal market.
Energy Sector: Monetizing the Negotiations
Meantime, on 27 July 2016 the new round Belarusian-Russian negotiations on gas prices and gas debt payment was held in Moscow. According to Russian side the debt of Belarus for gas has reached $270m since the beginning of the year.
Belarus' authorities believe that the price should be lower since energy prices are getting cheaper on the world market. Besides that Russia itself has lowered price for some consumers, for example, Armenia, but unwell to reduce price for Belarus.
Price for 1 thousand cubic meters of gas for Belarus is $132. While Belarus considers a fair price equal to $73. The main argument of Minsk stays the intergovernmental agreement in which it is written that for Belarus should be applied equal prices (export price minus transportation).
Meantime, in order to force the decision Russia has reduced oil supply to Belarusian refineries by 37 per cent. Due to such a sudden strike estimated losses of Belarus may rich additional $200m per quarter significantly outperforming the amount that Belarus saves on the price of gas.
Furthermore, the negotiations were complicated due to extra conditions that Russia put forward, namely to revive the previously announced privatization projects (MAZ, Grodno-Azot and other enterprises).
Summing up, the government still waits playing with gas bargaining and new coins arrived after denomination occurred on 1 July 2016. While it helps to avoid painful structural reforms and spend some time in the shuffle, it still little contributes to restore the shrinking economy.
Moreover, such situation may additionally transform into even harder problems in the next year – slowing down economy driving at a first gear cannot easily switch to higher one without improvements in labour productivity, innovation and entrepreneurship.
Aleh Mazol, Belarusian Economic Research and Outreach Center (BEROC)
This article is a part of a joint project between Belarus Digest and Belarusian Economic Research and Outreach Center (BEROC)
The First Ostrogorski Forum, Seminar at BSU, Belarus-Poland Relations – Ostrogorski Centre Digest
This summer Ostrogorski Centre analysts have analysed developments in Belarus-Poland relations, life of regional media and the case of a new potential political prisoner. The Centre also published a major study of Belarus-Russia relations after the Ukraine conflict.
In July the Centre held the first Ostrogorski Forum, a conference on foreign policy and security in Minsk which featured video-recorded debates of experts with different views.
The centre also organised a seminar on Higher and Non-Formal Education in cooperation with the School of Business and Management of Technology of the Belarusian State University.
On 29 June the Ostrogorski Centre held the first Ostrogorski Forum, a conference on foreign policy and security in Drazdy Club, Minsk. This year's conference theme was 'Inertia, strengthening neutrality or change the foreign policy orientation? Foreign policy Belarus at the present stage'.
The conference programme featured prominent Belarusian experts, both pro-government and independent, as well as academics from state universities and government officials.The programme included researchers from the Ostrogorski Centre, the Belarusian Institute for Strategic Studies, the "Political Sphere" institute, the Centre for European Studies and the Belarusian Analytical Workroom presented their papers on foreign relations and security.
The conference featured five studies conducted in spring 2016 with grant support from the Mott Foundation and Pontis Foundation and implemented jointly with Ostrogorski Centre.
The speakers discussed the issues of Belarusian soft power in the region, Belarusian-Russian relations after the conflict in Ukraine, foreign policy of Belarus in the context of the CIS, the potential of Belarusian neutrality and the geopolitical orientation of Belarusians.
The conference is expected to become an annual event to promote professional and respectful dialogue between experts with different political views. Videos of all conference sections (mostly in Belarusian) are available online.
Seminar on Higher and Non-Formal Education
On 30 June the Ostrogorski Centre and School of Business and Management of Technology of Belarusian State University jointly organised a seminar in Minsk on higher and non-formal education in Belarus.
The seminar featured three presentations of studies, conducted by the Ostrogorski Centre (Revisiting non-formal education in Belarus), the Centre for European Studies (Problems of modernisation of higher education in Belarus: social sciences and humanities) and School of Business and Management of Technology of BSU (Conditioning factors of entrepreneurial activity Belarusian students).
On 1 August, the Ostrogorski Centre published a new analytical paper "Belarus-Russia Relations after the Ukraine Conflict" by Ryhor Astapenia and Dzmitry Balkunets. The research is available in three languages: English, Belarusian and Russian.
Ryhor Astapenia argues that Poland will be improving its links with official Minsk at the expense of opposition groups. Poland has recently been reducing its level of support for pro-democracy groups and is trying to improve relations with the Belarusian authorities.
However, the changes in Polish policy cannot be explained only by attempts to improve relations with Belarusian authorities. The lack of chances for democratic changes as well as brutal repression reduces interest in Belarus among many foreign donors, including Polish ones.
Vadzim Smok analyses the case of Eduard Paĺčys, who is undergoing criminal investigation for creating a website which allegedly contained radical ideas. A new political prisoner is in the interests of neither the European Union nor the Belarusian government, as a warming of relations continues to be important for the bilateral agenda. However, Belarusian authorities may use the case of Eduard Paĺčys to demonstrate that any activity inspiring national conflict, including anti-Russian discourse, will be stopped immediately.
Ryhor Astapenia discusses the problems of regional newspapers in Belarus, which continue to suffer due to repression and the poor economic conditions of recent years. Nearly all of them currently lack funds, forcing talented journalists out of regional publications. The West have done much to support the regional press, but could do more to train media managers and put pressure on the Belarusian government to include independent newspapers into public distribution network.
In July the Ostrogorski Centre successfully completed the project producing eight research papers in the areas of foreign policy, security and education of Belarus. The project was supported by the grant from the Mott Foundation and implemented in cooperation with the Pontis Foundation. Please find a publication of paper abstracts here.
Comments in the media
Analyst of the Ostrogorski Centre Ryhor Astapenia explains on Polish Radio what to expext during coming visit of the Turkish president to Belarus. While earlier Turkey needed Belarus as a medium in economic relations with Russia, particularly in tourism, now this role of Belarus diminishes as Russia and Turkey lower the heat in bilateral relations.
Yaraslau Kryvoi in the Interview of the Week on Radio Liberty speaks on attempts of Belarusian civil society to influence policies of Belarusian authorities, conference Ostrogorski Forum and the consequences of the Brexit vote in the United Kingdom.
Ryhor Astapenia argues that Belarus is seeing an economic revolution. What is the nature of this revolution? How stable will the new Belarusian ruble be? Will the authorities legalise Pahonia following the popularity of national ornaments? Listen to the analysis of these and other topics in the "Political mirror" programme on the Polish Radio.
Vadzim Smok takes part in consultations with a group of advisers to the Board of Directors of the European Bank of Reconstruction and Development. Advisers are visiting Belarus to gain a better understanding of Belarus and the bank’s operations. During their stay they will meet experts, municipal authorities as well as local and foreign investors.
The Ostrogorski Centre continues to update the database of policy papers on BelarusPolicy.com. The papers of partner institutions added this month include:
- Aliena Arciomienka. Civil society and political opposition have a particular view of reforms in Belarus. BISS, 2016.
- Sierž Naūrodski, Iryna Lafiuk, Vladimír Benč, Uladzimir Valetka, Martin Lačný. Belarus, Moldova, Ukraine: machine industry report. CASE Belarus, 2016.
- Leanid Spatkai. Border security of Belarus. Belarus Security Blog, 2016.
- Alexander Gedranovich, Mykhaylo Salnykov. Analysing the productivity of the Belarusian system of higher education. BEROC, 2012.
- Anastasiya Luzhina. A convergence analysis of the Russian and Belarusian economies in the case of monetary integration. BEROC, 2012.
Think tanks in Belarus are encouraged to submit their research for inclusion into the database by completing this form.
The Ostrogorski Centre is a private, non-profit organisation dedicated to analysis and policy advocacy on problems which Belarus faces in its transition to market economy and the rule of law. Its projects include Belarus Digest, the Journal of Belarusian Studies, BelarusPolicy.com, BelarusProfile.com and Ostro.by.