Belarus Country Report Dec16 - December, 2016

December 20, 2016

The economy of Belarus is still deep in recession but the situation is
stabilizing and the IMF expects a mild 0.6% growth to resume in 2017,
while several other forecasts predict another contraction of about 1%.
Recession in neighbouring Russia and low global commodity prices caused the
economy to shrink 4% y/y in January-February after a record fall of 3.9% y/y in
2015, the first recession in two decades. Belarus’ economy will continue to
contract in 2017 before returning to 1.1% growth in 2018 , the World Bank's
economist for the republic said on December 12, reports BelTA .
Industrial production growth remains in the red and unemployment is
creeping up, albeit from a low base . Consumption is expected to decline as
although nominal wages have risen in the last years, the government has
ignored the inflationary impact of hiking wages and almost all the gains have
been inflated away.
Inflation has also been a problem but is in retreat . The National Bank of
Belarus (NBB) intends to cut its benchmark interest rate to 14-16% by the end of
2017. At the same time, the regulator will keep its current 18% rate ( reduced by
2 percentage points in August) unchanged for the rest of 2016.
At the same time investment in the dumps but since the boom years the
government has been investing heavily . In recent years this investment has
been financed by foreign borrowing rather than funds drawn from the economic
rents drawn from subsidised cheap Russian energy imports.
Many of Belarus problem derive from the problems in Russia which has
been implicitly supporting the Belarusian economy for two decades to keep it on
board as a political ally. But Russia can no longer afford this largess and has
been reducing its support.
This has two impacts on Belarus: to make it look for a diversified partner
base and cast its net increasingly further afield - specifically it has been
courting China. Secondly, the growing economic pain has spurred the
government into attempting some real reforms, albethem limited to improving the
efficiency of the state spending programme rather than go for true liberal
economic reform, which nevertheless may result in some significant gains.
Belarus should in 2017 attract $1.4bn in foreign direct investment on a
net basis (excluding direct debt to investors for goods, works, services),
according to a decree on Belarus' social and economic development targets
published on the national legal Internet portal on December 14. That is slightly
more than the $1.3bn it got in 2015.
Belarus expects GDP dynamics to turn positive again in 2017 (1.7% as
against 2016) and export to show strength of 3.8%, BelTA news agency
cites from the document, which approves quarterly parameters of the key
performance indicators for the government, the central bank, regional
administrations and Minsk city administration.The highest growth target for
export of merchandise was set for the ministry of industry at 11.7%, and in the
export of services for the ministry of architecture and construction at 5%.

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