Economic Growth Slows but Prices Rise – December Digest of Belarusian Economy
Over the recent months the rate of economic growth in Belarus has been gradually declining. For eleven months the GDP grew only by 0.9%. A decline in industrial production had a detrimental effect on economic growth. Despite the decrease in production volumes, the level of finished goods in warehouses of enterprises remained high. Increases in retail turnover stimulated GDP growth.
Despite the slowdown in inflation in 2013 in comparison to the previous year, the increase in consumer prices for the year will exceed established predicted values. In connection with the accelerated rate of inflation in the second half of 2013, as well as to maintain a stable situation on the currency market and the banking sector, the National Bank decided to keep the refinancing rate unchanged till the end of 2013.
In November-December 2013 the situation on the foreign exchange market remained relatively stable. Nevertheless, the demand for foreign currency by the population remained elevated at the end of November.
Inflationary processes and refinancing rate
At the end of the year it became obvious that inflation rates would go beyond their originally predicted values. In November alone, consumer prices rose by 1.6%. On an annual basis, growth in real prices reached 13.8% (with predicted values being set at 12%). In January-November 2013, the service sector saw the largest price increase , partly because of the rising cost of services that are regulated by the state.
The accelerating growth of prices in the second half of 2013 contributed to the fact that the refinancing rate remained unchanged throughout the second half of 2013. The last time the National Bank lowered the rate to 23.5% was in June. Apart from inflation, this change is an indicator that shows changes in the both the foreign trade sector and the foreign exchange market.
A decrease in the rate of refinancing signals the banks of the possibility of a decrease in interest rates on ruble deposits and loans. Such dynamics along with the low level of public confidence in the Belarusian ruble, accelerating inflation and increasing fluctuations of the Belarusian ruble against foreign currencies, may provoke an outflow of ruble deposits by the population from the banks.
Moreover, these changes may serve as an additional stimulus for demand for foreign currencies by the population. In view of these risks, the National Bank decided to keep its current refinancing rate until the end of the year.
The situation on the currency market
At the same time, the situation on the currency market remained stable, while preserving certain negative trends. In November and December the smooth nominal devaluation of the Belarusian ruble continued. On 20 December 2013 the exchange rate of the Belarusian ruble against the U.S. dollar was 9,470 Belarusian rubles to every one US dollar.
In recent months the dynamics of the Belarusian ruble was influenced by such factors as the acceleration of inflation, deterioration in foreign trade and the continued increase in demand by the population for foreign currency.
In November the population purchased $237.2m in foreign currency. Since the beginning of the year the purchase volume exceeded sales volume by $1.9bn. Growth in demand for foreign currency by the population is explained by several factors.
First of all, the wages increase in 2013 contributed to the growth of retail turnover including increased sales of imported goods. In addition, the low level of public confidence in the Belarusian ruble stimulated citizens to choose the U.S. dollar and Euro as their currency of choice for savings.
In contrast to the increased demand for foreign currency by the population, foreign currency supply exceeded the demand on the foreign exchange market of business entities. Companies and organisations for eleven months in 2013 had sales amounting to $435.2m. At the same time value of this indicator is lower than the results of the previous year. Deterioration of foreign trade explains decrease in the supply of foreign currency.
According to the preliminary information, the negative balance of goods and services in January-October 2013 was $712m, while in the same period of 2013 positive balance was equal to $3.7bn. Such factors as increased demand for consumer goods in the domestic market by the population, exports cessation of solvents and diluents, and the deterioration in the external markets had a negative impact on trade balance. Among positive factors, we can note an increase in net exports of consumer goods due to increasing food exports.
Stocks of finished goods in warehouses continued to increase
Difficulties in the sale of goods, primarily in foreign markets, contributed to an increase in the stocks of finished goods in the warehouses of enterprises. In April 2013, the level of stocks in relation to the volume of production exceeded 80%. In the third quarter enterprises managed to slightly slow the growth of their stocks, but in October their growth resumed again. By 1 December, the level of stocks of finished goods for their monthly industrial output was 74.3%.
The increase in stocks of finished goods occurs against a backdrop of a decline in industrial production. A reduction in the production from petroleum and chemical industries provided the main influence on the dynamics of this indicator in 2013.
Textile and metallurgical production, as well as machinery, equipment and vehicles production reduced their output volumes. However, such industries as woodworking, electrical equipment manufacturing and food production demonstrated output growth.
Anastasiya Luzgina, 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)
Celebrating the New Year’s Eve in Belarus: The Russians are Coming
Traditionally, Belarusians celebrated Christmas as a part of Kaliady – a two week long pagan holiday of winter solstice. However, today most Belarusians celebrate New Year’s Eve as their main winter holiday. If you want to spend time with your family at here during your this holiday and also have some fun playing golf, check the options from golf holidays direct by clicking the link.
This tradition comes from Soviet times, when communists rejected the sacred sense of Christmas time. New Year’s eve celebrations in post-Soviet lands remains closely linked to feasts of food, consumption of alcohol and fireworks.
Belarusian authorities organise most celebrations that take place in public places and enforce tough security measures. Many people are adverse to these conditions and prefer to stay at home, while others go abroad to celebrate the New Year, western style.
Meanwhile, thousands of foreign tourists come to Belarus for the holiday, most of them being Russian. Here, they escape from Moscow’s hustle and bustle and enjoy lower prices, organic food and plenty of Soviet nostalgia.
Traditional Kaliady vs. the Soviet New Year
In Belarus, Orthodox believers celebrate Christmas on 7 January in accordance with the Julian calendar, whereas Catholics and Protestants celebrate Christmas on 25 December, using the Gregorian calendar. Traditionally, Belarusians celebrated Christmas over a two week stretch, a period traditionally called Kaliady, it is a fusion of the Christian holiday of Christmas and the pagan holiday of winter solstice.
The day before Christmas is called Kućcia, from the name of the ritual barley dish. That evening, a family would have a certain number of other dishes on the table, all of them Lenten in character — in other words, dishes without meat. When sitting at the table, the family’s eldest member called upon the spirits of their family ancestors as well as the god of frost to join their celebration and give good favour to their household.
The most joyous aspect of Kaliady for kids was them taking to the streets for a loud, ruckus stroll around their town or village, wearing handmade costumes and masks, singing ritual songs, wishing the families health and a good harvest in the coming year. In return, they would ask for a gift of food, drink and/or money.
While the traditional Kaliady celebration exists in some villages even now and enthusiasts are trying to revive it in nation’s cities, the Soviet tradition has made long inroads and its winter celebration is much more widespread. The Soviet atheist empire rejected any kind of sacred religious holidays and firmly entrenched New Year’s Day at the centre of the year’s festivities. As a result, today throughout the former Soviet Union New Year’s Day plays the same role as Christmas in the west.
Happy residents and nervous authorities
As perhaps anywhere else during Christmas time, in Belarus people hurry to buy presents for their friends and relatives. Christmas tree markets pop up everywhere, and Belarusians often are greeted in public transportation, various shops and other organisations with well wishes from local authorities in the form of posters.
For Belarusians, an abundant, overflowing New Year’s Eve table is a must. People tend to eat and drink a great deal, even excessively, and are prone to cooking a great number of dishes for the night’s festivities. Among them one will find the omnipresent champagne, tangerines and Olivier salad which is made out of potatoes, eggs, mayonnaise and ham.
Before midnight, people watch the president’s New Year’s address to the country and at midnight people drink champagne and set off fireworks. Most people start drinking long before midnight, and by midnight are already in quite a fine state. Others, who drink less actively, set off fireworks, give and receive presents and often go out on the town.
The ocal authorities usually set a large New Year’s tree, which resembles a Christmas tree in many regards, in every district of the city for people to gather around after midnight. In Minsk alone there were 27 sites designated for the masses to celebrate the end of 2012.
There, state-organised performances usually take place, with Father Frost, a type of Soviet Santa Claus, and singers and dancers. However, it has become more difficult for people to celebrate outdoors, as security measures and police control has become rather burdensome in recent years.
After the terrorist act of 2011 the authorities became very nervous of any kind of event where a large group of people would be gathered. At all of the main sites, the police will place a turnstile in order enable them to check people one-by-one. Many of the more drunk citizens were prevented from joining the public celebrations and turned back by the police. For security reasons, only half-litre bottles of liquid are allowed. Animals are also prohibited from being brought in to the officially designated celebratory space.
Even during Christmas celebrations at churches, policemen have become a fixture. They control people’s movement and even try to spread them throughout the interior of a church in order to prevent a stampede.
These measures persuaded many that it is better to stay at home, as soberly walking through the turnstiles does not look like all that much fun on New Year’s Eve. For many Belarusians, celebrating at home seems to be rather boring and after a large feast, they want to go out to meet their compatriots in welcoming in the new year.
It becomes increasingly popular among Belarusians to celebrate the New Year abroad, especially in their own neighbourhood: Poland, Ukraine, the Czech Republic or Lithuania. Here people find a different, more Western style of celebrating the New Year. Meanwhile, people from other countries, especially from Russia, prefer to celebrate the holiday in Belarus.
Russians Celebrate New Year in Belarus
This year, Minsk offers New Year’s Day tours for foreigners for $440, with around a hundred different excursions made available. According to official information, ten thousand tourists will come to Minsk for organised tours, most of them Russians.
However, it is impossible to estimate the precise number of Russians that come to Belarus to celebrate New Year since border control and monitoring do not exist. However, as tourist agencies claim, all hotels, hostels and flats for short-term rental were full in Minsk at the end of December.
Meanwhile, the Russian ambassador to Belarus Aleksandr Surikov stated in an interview that over a million Russians would come to Belarus for this New Year’s Eve. It remains unclear where Surikov got his hands on these numbers, but Belarus seems really attractive for Russians as a New Year’s Eve destination, and not only its hotels but also vacation houses and even agro-tourism farms were flooded with Russians tourists.
Unlike tourists from the European Union and North America that need visas, Russian visitors benefit from visa-free travel to Belarus.
They come to Belarus to try to escape from the New Year’s Eve fuss of Russian megalopolises, and find low prices, better quality food, and a type of Soviet oasis with other more authentic traditions as well. “The Russians are astonished that we are not afraid to let our children out to play alone outside, everything is clean and groomed and the people are nice”, the owner of one agro-tourism farmhouse explains.