Macroeconomic stabilization on shaky ground – digest of the Belarusian economy
On 3 April 2017, Economy Minister Vladimir Zinovsky announced a negative forecast for first quarter GDP growth in Belarus. This comes despite an increase in industrial output and exports at the end of March.
In this context, on 6 March a new IMF mission arrived in Belarus in an attempt to encourage the authorities to implement further economic reforms.
Meanwhile, insufficient efforts at liberalising the private sector still hinder the emergence of a new pillar of the Belarusian economy.
Economic growth: shaky stabilisation
Economic data for the first two months of the year show mixed results. On one hand, industrial production and exports have improved (see Figure 1).
On the other hand, the government continues to postpone measures which would aid in the financial recovery of enterprises. Authorities are also putting off fundamental decisions on structural reform, thus prolonging the economic recession.
For example, investment demand remains in deep trouble, shrinking for the 14th quarter in a row. During the first two months of 2017, it dropped by about 17.4 per cent year on year (see Figure 1).
Therefore, during the rest of the year, the economy faces the delayed effects of investment depression, such as reduction in output due to the reduction of production capacity; this affects such important industrial enterprises as Gomselmash, MAZ and MTZ. Moreover, firms facing financial losses influence not only the amount of investment and production, but also the employment rate and wages.
To address the latter issue, on 21 March President Alexander Lukashenka banned job cuts without the initial approval of local authorities. The promised $500 average monthly wage for 2017, however, remains off the table (it currently hovers around $370).
Therefore, taking into account the implausibility of reducing SOE costs, the painful process of sustainable stabilisation of their operations will be postponed even further.
For these reasons, the entire economy will take even longer to emerge from economic imbalances. Given the prospects of economic dynamics, such a pattern means that in 2016 the 'price' for structural weaknesses remains unpaid, and structural corrections will continue in the upcoming months of 2017.
The financial system: feeling the pressure of the money shortage
Under these conditions, on 16 November 2017 representatives of the IMF once again discussed the terms for a new credit programme with Belarusian authorities.
Six months before, during the IMF's previous visit, the economy was experiencing a long-lasting recession which called the stability of the banking system further into question. However, this time the National Bank of Belarus (NBB) tried to win over its sceptical visitors.
On 6 March 2017, regulators unveiled a new report, which evaluated the impact of potential shocks on the banking system. In particular, the NBB evaluated the impact of the devaluation of the Belarusian ruble on banking stability.
Judging by the results of the report, Belarusian banks are sufficiently strong. Banks would feasibly survive even a 30 per cent devaluation of the Belarusian ruble.
However, independent experts believe that the stability of Belarusian banks depends mostly on the state of public finances, first and foremost because struggling state-owned enterprises urgently need fresh money to repay their debts. According to the NBB, in 2016 SOEs contributed to a total of 81 per cent of bad-asset growth in the banking system.
Nevertheless, before signing a new credit programme with Belarus, the IMF will still insist on implementation of decisive structural reforms in the near future, regardless of what official figures say.
Private sector: prolonged liberalisation
In turn, the underdevelopment of the Belarusian private sector (in particular small and medium enterprises, or SME) still remains one of the key problems of the Belarusian economy.
For example, SMEs' share in the Belarusian GDP accounts for approximately 30 per cent, which limits competition on the domestic market and leads to inefficient allocation of both material and labour resources. In contrast, according to the World Bank, in other developing countries this parameter ranges from 60 to 75 per cent of GDP.
In this light, on 2 March 2017 a new presidential decree intending to improve the procedures of state registration and liquidation of economic entities was launched. The document limits the right of the tax ministry and other authorised bodies to invalidate the state registration of a business entity or its liquidation through the court to three-year periods.
The head of the Association of SMEs, lawyer Syarhei Balykin, considers the decree a progressive step, but he thinks that by and large it will make things easier only for official registrars. Moreover, according to him, this legislative act partially degrades the position of entrepreneurship.
For example, the document actually limits possibilities of creating new companies. In particular, the decree prohibits the registration of new business entities for founders of liquidated entities or for those going through bankruptcy proceedings.
In addition, the principle of collective responsibility (meaning that all of a given company's co-founders bear responsibility for violations in economic activity of any individual co-founder) still remains in force. In the opinion of Syarhei Balykin, such restrictions violate the rights of entrepreneurs to implement business projects.
The last month has shown certain positive trends in the stabilisation of industrial production and exports. However, the Belarusian economy still struggles with problems with its banking system, lack of external finance, and the unresolved issue of increasing private sector involvement.
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)
Killing children on social media
In March, two Belarusian youngsters attempted to commit suicide while playing a 'game' on the popular Russian social network VK.
Belarusian law enforcement services have initiated two criminal cases, connecting the suicides with a game called ‘blue whale’, especially popular in Russia and Ukraine.
The game consists of 50 dangerous quests which youngsters, threatened by the game's administrators, have to perform in reality.
In other countries, such as Russia, Ukraine, Kyrgyzstan, and Kazakhstan, even more children have committed suicide playing the game. The Main Internal Affairs Directorate has revealed that thousands of Belarusian youngsters have already registered in the dangerous groups and informed schools and parents of the danger.
Nevertheless, a direct correlation between teen suicides and the game remains difficult to draw. The overhyping of the game in the media is not evidence of the game's existence in real life. Under such circumstances, it is important that control of social media does not turn into censorship.
What is the ‘Blue Whale’?
'Blue whale’ has become the code name for a range of dangerous internet pages on the Russian social network VK. These pages and groups appeared on VK in 2015 in Russia, Belarus, Ukraine, and Kyrgyzstan under the names ‘blue whale’, ‘wake me up at 4:30’, and ‘silent house’.
Allegedly, the groups target youngsters by enticing them to play a game which later involves risky and dangerous tasks which must be performed in reality. The last task is suicide. The game consists of 50 tasks, such as drawing a whale on your arm using a blade or listening to psychedelic music. The game can last from 50 to 57 days and involves personal threats and psychological pressure on youngsters.
The scenario of the game is always similar. Moderators threaten youngsters and demand that they follow their instructions. If the child wants to quit the game, moderators threaten to kidnap their relatives. The media has reported many cases in which parents or friends found children's ‘last note’ and managed to prevent suicides. Recently, a student from Vitsebsk saved the life of her 17-year old friend, who was playing the game and left her last note on her VK page.
Even though the Russian Investigative Committee uncovered the identity of the man who created the ‘game’, the popularity of the ‘blue whale’ only seems to be growing. In 2016, Filipp Budejkin, a Russian national, was accused of inciting 15 young people to suicide over the internet via ‘death groups’. At the same time, media in Kazakhstan, Ukraine, and Russia are still reporting an increased number of suicides connected with the game.
Are Dangerous Games Becoming Popular in Belarus?
The number of players in Belarus is on the rise and has already led to several dangerous incidents. TUT.by reports that thousands of Belarusian youths have registered in ‘death group’ on VK. During the last month, investigative committees initiated two criminal cases after two young people in Vitsebsk and Minsk intended to commit suicide playing the game. Two 14 and 15-year old girls in Hrodna ended up in psychiatric care after their participation in the game came to light.
Although the media in Belarus has reacted to the popularity of the ‘death games’, the Belarusian government and security services remain silent. Belarusian rescue services recently encouraged parents to be on the look out due to the increasing number of suicides. However, on the next day, the Ministry of Internal Affairs stated that the suicide rate among young people caused by social media has not risen.
Public awareness about the dangerous game in Belarus is growing. Some schools have sent text messages to parents informing them of the possible danger. Meanwhile, the media aim to conduct their own investigation and gather more information from officials. More and more psychologists are recommending that parents keep track of their children's activities on social media. Several weeks ago, local officials in Hrodna distributed information to all schools and encouraged teachers to conduct parent meetings discussing the possible danger. An investigative committee in Minsk is currently attempting to identify the real identities of the groups’ administrators.
How real is the threat?
Although many Belarusians are alarmed about the danger of ‘death groups’ on VK, some parts of society doubt whether the danger exists at all. An investigation of the influence of social media groups on youth suicides first appeared in the Russian publication Novaya Gazeta. Meanwhile, following a wave of heated discussion, some media outlets believe that the phenomenon is a myth created by the Russian government as an excuse to control social media and the internet. In Kyrgyzstan, authorities have already announced their intention to increase control of the internet.
On 20 March, the vice-speaker of the Russian Duma announced that youth suicide had increased by 57% since last year. However, according to sociologist Evgenii Andreev, the number is most likely fake, as it was announced two months before an annual UNICEF report on suicide statistics. Suicide in Belarus has been falling over the last several years, to 13 suicides among 10-17 year-olds in 2016. The decreasing number of suicides in Belarus provides weak evidence of the existence of ‘death groups’.
The number of 'death group' members on VK also calls the real threat of the game into question. The investigation by Novaya Gazeta has provoked a wave of discussion which could unintentionally widen the popularity of groups with names such as ‘blue whale’ or ‘4:20’. The Belarusian Investigative Committee stated to TUT.by that youngsters themselves are becoming moderators, employing psychological pressure to persuade their peers to commit suicide.
Although the existence of death groups is still under question, law enforcement agencies are attempting to control the situation in Belarus. Recently, the Main Internal Affairs Directorate submitted a list of children registered in dangerous groups to the Ministry of Education. Teachers and school psychologists aim to reach parents to prevent possible suicides. Nevertheless, the investigative committee has yet to clarify any measures taken against moderators and administrators of such groups.
More young people are now becoming active users of social media. There is therefore an urgent need to teach children internet safety. Despite heated debates surrounding the dangerous games, it remains important to maintain a balance between control and censorship. Extended control of social media activity could easily turn into restriction of freedom of speech and intrusion into private life. The precedent was set in 2009 when the government of China restricted access to Facebook and Youtube as a safety measure.