Belarus will be the last eastern European country to emerge from recession this year – and may turn in one more year of negative growth if things go badly.
Belarus has been pulled down by a combination of its own economic problems and the spillover from Russia’s problems, its biggest market, made worse by a trade row with its larger neighbour. The World Bank believes that the economy will contract this year before returning to a meagre 1.1% growth in 2018.
This year will also be made hard as a substantial amount of external debt starts coming due. Minsk is seeking a $700bn loan from Russia to refinance its debt and it has been flirting with the IMF as an alternative source of funding. However, given the strings attached to the IFI money it is unlikely any deal will be done.
The banking sector continues to give cause for concern where non-performing loans (NLPs) are uncomfortably high. The government has instituted a number of changes to try and make directed lending more effective but the hybrid system is a half measure and doesn't address the fundamental problem of the state’s overly large role in the economy.
However, the bottom seems to have been passed and industrial production is starting to pick up again. A revival in western Europe will help as Belarus has far more exports to the EU than its neighbours and so will be lifted by the rising tide there.
And not a minute too soon. Belarus president Alexander Lukashenko is under pressure as a series of country-wide protests shook his usually iron hold on the country as the people came out to demonstrated against the falling standards of living.
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