In the past years, the IMF often concluded that the economic performance of Belarus was very good. In the period between 2004 and 2008 the country recorded an economic growth of on average 10 percent, while the inflation was not too high and showed a strongly downward trend. In parallel to this, the country pursued an admirable policy, providing the regime popularity among the population. The unemployment rates were insignificant, the real wages were growing strongly, the level of poverty was the lowest among CIS members. Now, Russia and the global financial crisis threaten to be a spoil-sport.
Important reasons for solid macro-economic performance of Belarus were the enormous energy subsidies it received from Russia, the customs union with that country and the foreign (energy) demand. Belarus becomes vulnerable once these favourable external circumstances change.
This already became clear when the global economic crisis hit Belarus in 2009. Indeed, the economy shrank just a little bit in 2009. However, compared to the level of previous growth the decrease was immense. Moreover, the support from Russia is declining further. In 2009 Russia promised to provide a loan of 1 billion dollars, but it transferred only 500 million and cancelled the rest. It is also decreasing its energy subsidies.
Table 1. Current and expected economic situation, 2007-2012 (% GDP, unless specified differently)
Table 1. Current and expected economic situation, 2007-2012 (% GDP, unless specified differently)
|
|
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Real growth GDP (% growth) |
8.6 |
10.0 |
-0.3 |
3.8 |
4.4 |
5.3 |
6.3 |
6.9 |
|
Nominal GDP (billion Belarusian Ruble) |
97.2 |
128.8 |
138.4 |
157.4 |
178.5 |
203.0 |
233.1 |
269.1 |
|
Inflation, end of the period (% growth) |
12.1 |
13.3 |
10.5 |
8.0 |
6.0 |
6.0 |
6.0 |
6.0 |
|
Current account balance |
-6.8 |
-8.4 |
-11.0 |
-7.2 |
-5.6 |
-4.9 |
-4.0 |
-3.4 |
|
Export of goods |
53.7 |
54.8 |
44.3 |
50.6 |
50.7 |
50.4 |
50.5 |
50.7 |
|
Import of goods |
-62.7 |
-64.9 |
-56.3 |
-59.1 |
-57.7 |
-56.5 |
-56.3 |
-56.1 |
|
Balance of trade |
-9.0 |
-10.0 |
-12.0 |
-8.5 |
-6.9 |
-6.2 |
-5.8 |
-5.3 |
Source: http://www.imf.org/external/pubs/ft/scr/2010/cr1031.pdf.
Table 2. Government budget (%GDP, unless specified differently)
|
|
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
|
Revenues |
49.5 |
51.0 |
44.2 |
43.0 |
41.9 |
41.9 |
41.5 |
41.3 |
|
Expenses |
49.0 |
49.6 |
45.3 |
44.7 |
44.0 |
43.9 |
43.0 |
42.8 |
|
Budget deficit |
0.4 |
1.4 |
-1.1 |
-1.7 |
-2.0 |
-2.0 |
-1.5 |
-1.5 |
|
Official reserves (million dollars) |
4.2 |
3.1 |
5.6 |
7.2 |
8.7 |
10.4 |
12.1 |
15.4 |
|
Gross external debt |
27.7 |
25.2 |
42.8 |
44.1 |
41.8 |
38.4 |
33.8 |
30.7 |
|
Public* |
6.5 |
6.9 |
17.9 |
18.2 |
17.9 |
16.9 |
15.5 |
14.0 |
|
Private** |
21.2 |
18.3 |
24.9 |
25.9 |
23.9 |
21.5 |
18.4 |
16.7 |
*Including debts of the Central Bank and government-guaranteed debts
**The private external debt can be mainly put on account of publicly owned undertakings.
Source: http://www.imf.org/external/pubs/ft/scr/2010/cr1031.pdf.
Before 2007 Belarus was exempt from payment of the Russian export tariffs for oil. Belarus exported two thirds of the cheap oil it processed in its refineries to Europe against the higher market price. This provided Belarus with approximately 5 billion dollars per year. After an energy conflict in January 2007 a new agreement had been determined for a period of three years, where, among other things, it was agreed that in case of resale Belarus would refund the largest share of the export tariff (85 percent in 2009) to Russia.
However, Belarus did not do so. On January 27, 2010 it reached a new agreement with Russia, according to which the country remains exempt from export tariffs Only for the oil that it consumes domestically (6.3 million tonne) and the small part that is being exported back to Russia. For the remaining 14 to 15 million tonnes that Belarus imports via pipe lines, the country will have to pay the full export tariff from now on. This way, the price is increasing by about 50%, from 380 US dollars per tonne in December to 560 US dollars in January. The negative consequences of this could hardly be exaggerated.
It is easily imaginable that the forego income will mean the doom of the authoritarian Lukashenka regime. Sale of refineries to Russia will only bring about temporary financial relief. The financial pressure of Russia made Belarus, which still has many of the characteristics of the command economy, to start reforming its economy. Mainly in the field of business great progress has been achieved in the recent years, but democratisation will be more difficult for Lukashenka. Naturally Putin is going out on a limb because his policy is driving Belarus into European arms, and perhaps the regime that will take office after Lukashenka would maintain the distance with Russia.
It is remarkable that both the IMF and the Belarusian authorities do not seem to worry much about the nearby future. The IMF postulates that Belarus has taken sufficient measures to limit the negative consequences of the oil agreement with Russia on the budget and the current account balance. The IMF is considerably optimistic about Belarus, because, as the Fund argues, the export prices will increase and the government is pursuing a good financial and monetary policy. The rehabilitation programme that was agreed on with the IMF in January 2009, is been accurately executed by Belarus.
That will bring the country 3.5 billion dollars in total until the middle of 2010. Both parties expect to agree on a new programme for the subsequent period.
The greatest risk to the stable economic growth in the future, according to the IMF, is when the authorities would pursue a too expansive economic policy in order to reach a high economic growth forcefully. In this regard, it is important that the authorization of credit, in particular to state companies, will remain limited. In most countries the supply of credit should be stimulated these days, however the financial state institutions of Belarus tend to pump a lot of credit into the country’s economy. Therefore the IMF is very satisfied that Lukashenka increased the independency of the Central Bank. All representatives of the government and the banks will disappear from the managing bodies of the Central Bank. Loans of the Central Bank with a lower interest rate than the market interest rate will disappear as well.
Unfortunately juridical independence in the current Belarus does not say all, because the Lukashenka regime does not have any institutions which would go against the will of the president. The paper independence of the Central Bank is therefore limited by the presence of president Lukashenka. But if he would disappear from the stage, these limitations most likely would not exist any longer.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++In his annual state-of-the-nation address which was carried live by Belarusian state television and radio on 20 April, Lukashenka vowed not to bow to economic pressure, noting that help unexpectedly came from the West. He said, however, that Belarus was no longer planning to borrow from the West.