Why Are Belarusian Economic Forecasts Constantly Inaccurate?
According to the official five-year Socio-Economic Development Programme For 2011-2015 the GDP was supposed to increase by 62-68 per cent by the end of 2015. In reality, the growth is likely to hit around 6 per cent. How did the government manage to get it wrong by such a large disparity?
After 25 years of transition, the Belarusian state forecasts remain unreliable. But Belarusian independent think tanks, commercial banks and international organisations also frequently overlook the real economic trends and have to revise their forecasts several times throughout any given year.
The Belarusian quasi-socialist economy is hardly suited for macroeconomic forecasting. Irrational decision-making by the Belarusian authorities and incentives for officials to polish the data hinders sound forecasting. Additionally, official statistic gathering and reporting is still in its infancy and competition between those making the forecasts is scarce.
Systematic Errors in Forecasting
Belarusian state-employed economists regularly fail to provide accurate predictions about the economy. They often fail to provide proper predictions even for economic growth, probably the most important macroeconomic indicator for any economy. The government's annual forecasts continuously underestimated the GDP's actual growth by almost a quarter from 2000-2006, while from 2009-2015 their figures exceeded its actual performance by almost three quarters.
In other words, in 2009-2015 official economic forecasts exceeded the true GDP's growth on average by 5.1 percentage point per year. Hence, forecasts even just the year ahead have been highly inaccurate.
The forecasting errors in Belarus have become even clearer after comparing them with more developed post-socialist countries. True, the annual GDP forecasts projected for Poland’s central budget also happened to miss the actual economic growth in 2000-2015.
Nevertheless, in contrast to Belarus, the margin of error was much smaller and offset one another in consecutive years. In particular, in 2009-2015 they fell in a range of -2.5 to +2.4 p.p. but their sum in the whole period was only 0.8 per cent of GDP. Neither the global financial crisis nor other external factors spoiled Poland’s governmental forecasts.
Frankly speaking, the poor results of economic forecasting in Belarus also concern Belarusian think tanks, individual economists, commercial banks, and international organisations (such as the IMF or the World Bank). For instance, in the last week Priorbank, the 6th largest bank in Belarus, reduced its GDP forecast for 2015 to -3.5 per cent. Yet, early this year in its first weekly economic review the bank projected economic growth at 0.5 per cent. Thus, in the absence of a war or a major natural disaster, 4.0 per cent of the GDP evaporated in less than seven months.
Unpredictable decisions of Belarusian authorities
Political discretion stands at odds with economic rationality in Belarus where state-owned enterprises (SOEs) account for 70 per cent of GDP (according to the EBRD). Belarus has a very weak market economy and whereas in other market-oriented countries an unprofitable state-run enterprise that regularly goes bankrupt would be dropped, in Belarus the authorities rescue SOEs at virtually any expense. Recently, Lukashenka ordered $0.6bn in financial aid to be sent to state automotive plants to stabilise their financial situation. Therefore, the authorities violate the very principles of economic predictability by ignoring some of the basic laws that rule any market economy.
Administrative decision-making play a bigger role in Belarus than in the average market-oriented economy. At times, it is very difficult to predict what the economically irrational choices of Belarusian authorities may be. Take, for example, the policy of raising the nominal average salary by 46 per cent over 12 months before the presidential elections in December 2010. Eventually, the officials’ continuous interference in the economy leads to macroeconomic instability.
Moreover, as Lukashenka regularly approves the official macroeconomic forecasts, state officials are encouraged to try to alter what is really going on with their statistics to make the outcomes look better than they really are. For instance, in autumn 2011 the government submitted to the President a draft forecast that had predicted 1.5 per cent GDP growth for 2012. Lukashenka’s harsh critique forced officials to promptly revise its growth forecast to 5.5 per cent but, needless to say, the GDP ended up growing by 1.5 per cent, after all.
Technical Obstacles For Forecasters
Technically, Belarusian statistics contain insufficient data to make accurate forecasts – relatively coherent data are available from 1995, but they cover only the last 20 years. Given this short time frame, it is difficult to determine the range and number of general business cycles that Belarus has witnessed (perhaps three of them). Moreover, during each business cycle Belarus has experienced several extraordinary events unfold such as its decision to abandon market reforms in mid 1990s, the period of generous energy subsidies in 2000s, and the 2008 global financial crisis. However, precise economic forecasting requires stable and replicable trends, something which Belarus currently lacks.
Additionally, the Belarusian state statistical committee suffers from a low level of credibility among both Belarusian and international experts alike. This distrust stems from the data from the 1990s and the beginning of the 2000s, a period of hyperinflation in Belarus. At a relatively high level of inflation, even minor errors in calculating the GDP might lead to a serious misrepresentation of economic growth that was the result of shifts in prices rather than levels of production. In a country report from 2004, the IMF stated that the Belarusian national accounts were overstating their real growth by about 1-2 per cent.
Little Competition Among Forecasters
Belarusian economists are reluctant to develop advanced macroeconomic models for forecasting due to the low level of competition between their counterparts to develop more accurate predictions. Very few economic units systematically produce forecasts in Belarus (the primary outlets are the National Bank of Belarus, Ministry of Economy, Ministry of Finance, IPM Research Center, and some commercial banks), but even fewer of them make their results public.
Without strong demand for sound economic forecasts and their subsequent assessment by an independent body, economists will continue to produce low-quality economic forecasts. Perhaps the National Bank of Belarus, alongside the national media, could set up and conduct a contest for the country's best macroeconomic forecasts. By drawing the attention of potential employers – be it the state ministries, businesses and think tanks – such a contest has an opportunity to attract the best economists and create incentives to improve their forecasting skills.
Candidates for 2015 Presidential Elections: Who Are They?
On 20 July the Central Election Committee of Belarus registered eight initiative groups which nominate candidates for the presidency. Except Lukashenka himself, two candidates can be regarded as pro-government, three as oppositional and the other two as neutral and marginal.
Both pro-government candidates hold a strong pro-Russian position, but they cannot hope for any serious support from Russia – Lukashenka would not allow anyone to play the Russian card in Belarus. Their role in the campaign is rather to support Lukashenka and criticise the opposition.
Pro-Government Candidates Criticise the Opposition
Siarhej Hajdukievič, the leader of the Liberal Democratic party since 1995, participated in presidential elections in 2001, 2006 and 2010. In the 1990s he held a position in the security services and in 2004-2008 had an MP mandate.
Hajdukievič calls his party a “constructive opposition”, but actually criticises Belarusian opposition leaders and demonstrates loyalty to the authorities. He has a rather populist programme, holds a firm pro-Russia position and supports deeper Eurasian integration. In 2010 the party even signed a cooperation agreement with the Russian-backed breakaway republic of South Ossetia.
The second pro-government candidate, a 64 year old retired colonel Mikalaj Ulachovič, appeared on the electoral field somewhat unexpectedly. He was closely affiliated with Lukashenka in the 1990s and served as his authorised representative at the 1994 presidential elections.
Ulachovič established the first Cossack organisation in Belarus in 1995, and remains an unchallenged leader of the pro-government Belarusian Patriotic Party, which hardly ever showed any serious political activity. Ulachovič also occupies a middle-level position in state bureaucracy.
In the interviews about the reasons of his nomination for president, Ulachovič states he disagreed with the authorities on a few minor issues. The Belarusian cossacks organisation has close ties with the Orthodox Church and are seen by many as a major pillar of Russian influence in Belarus. It is unclear where Ulachovič gets funding.
Ulachovič denies any ties to the Kremlin and “never was a fifth column, despite accusations of being Moscow protégé since 1995”. He says he strongly supports Belarusian independence, but sees the threat for independence in the west rather than in Russia.
The two pro-government candidates appeared very pro-Russian, but Lukashenka will hardly allow them to play the Russian card and receive considerable support from the east. As the history of Belarusian elections shows, a serious pro-Russian candidate has never appeared in Belarusian politics and not without pressure from the authorities.
As Russia remains the major factor in Belarusian politics, Lukashenka has a monopoly on dealing with the Kremlin and will not let anyone challenge it. Therefore, despite their pro-Russian position, these candidates will have to support the incumbent president or perish politically.
Oppositional Candidates Seek To Reach Out to People
The Belarusian opposition chose not to agree on a single candidate and three will compete for the presidential seat. However the problem is that not one of them actually hopes to win. The candidates explain their participation as an opportunity to show people as an alternative and de-legitimise Lukashenka's re-election.
Anatol Liabedźka, the United Civil Party leader since 2000, can be considered as a veteran of the Belarusian politics. He was an MP position two times in the 1990s. In the 1994 elections he supported Lukashenka, but later switched to strong opposition to the authorities.
Liabedźka says he participates in elections to prevent their international legitimation, as the authorities, according to his opinion, will try to forge the results if oppositional candidates participate. A part of the Belarusian opposition, including a hardline exile opposition website Charter97.org and the Christian Democracy Party, criticise this position, since they see a boycott as the only strategy to de-legitimise Lukashenka.
Siarhej Kaliakin, a leader of the former Communist party now called the “Fair World” party, is another veteran of the opposition to run for the presidency. He was an MP and communist party position back in Soviet times and became one of communist party leaders in independent Belarus.
In 1995 the party of Belarusian communists split in two because of a different position towards Lukashenka and Kaliakin headed the oppositional one. Kaliakin also ran for the presidential post in the 2001 elections. At the 2015 elections Kaliakin hopes to demonstrate to people an alternative view of the country’s development and to “fight for people’s minds”.
Tacciana Karatkievič, the third oppositional candidate, appeared as a totally new figure in Belarusian politics, but received the support of several major oppositional parties and movements. A representative of the Social Democratic Party and the Tell the Truth civil campaign, she is also backed by the For Freedom movement and the right-wing Belarusian Popular Front party. Karatkievič worked as a teacher and social worker and has the shortest record of political activity among oppositional candidates.
Despite wide organisational support, Karatkievič also expects to present people an alternative programme rather than receive a presidential post. As the Tell the Truth manager Andrej Dzmitryjeŭ put it, they will use the current campaign for training and the rebranding of the opposition.
The "Unclear" Candidates
The two remaining candidates, Viktar Ciareščanka and Žana Ramanoŭskaja, do not exactly fall into pro-government or oppositional categories. Viktar Ciareščanka is an experienced politician, who ran for presidency in 1994, 2001 and 2010, had an MP seat in 1996-2000. He has a PhD in economics and also studied in Ukraine and the United States, where he received an MBA from the University of Delaware. Despite his academic achievements, Ciareščanka remains an unknown and unpopular figure, who cannot hope for any achievements at the elections.
The other neutral candidate, Žana Ramanoŭskaja, on the contrary, has no experience in politics at all and appears in public for the first time without any organisational support. Her ambitions for the presidential post remain unclear and she looks rather an accidental person in the campaign.
The 2015 presidential campaign looks like a traditional electoral ritual: pro-government candidates will support Aliaksandr Lukashenka, while opposition and neutral ones will try to de-legitimise him or train their campaigning skills, but neither is seriously hoping to win.
Although many Belarusians would like to see a strong alternative to the current regime, elites, opposition and even all presidential candidates seem to accept that Lukashenka will stay here for another term.