Belarus reports GDP growth of 0.7% y/y in January

Belarus reports GDP growth of 0.7% y/y in January
The Belarusian economy grew by 0.7% year-on-year in January, the nation's Economy Minister Dmitry Krutoi said.
By bne IntelliNews February 18, 2019

The Belarusian economy grew by 0.7% year-on-year in January, the nation's Economy Minister Dmitry Krutoi told a government meeting on February 15.

According to the official, the economy started the year "exceedingly well". January's GDP result is "even slightly above the quarterly estimates" of the government, according to local state media.

Belarus' GDP grew by 3% y/y in 2018, according to the national statistics agency Belstat. Belarus' GDP grew by 2.4% y/y in 2017 after two years of recession. It contracted 3.9% y/y in 2015 following 1.6% y/y growth in 2014.

Meanwhile, recently, the Belarusian government was forced to revise downward its forecast for the country’s GDP growth in 2019 (from 4.5% y/y to 2.1% y/y). According to Belarusian officials, the new forecast takes into account recent changes in the external economic environment, including changes in oil prices and the economic situations of the country's major trading partners, specifically Russia, and the values of their currencies.

Specifically, the target scenario was initially based on an oil price assumption of $70 per barrel, but the assumption was eventually reduced to $65 per barrel.

Minsk's forecast also takes into account the negative consequences of Russia’s so-called tax manoeuvre on Belarus. The tax manoeuvre shifts the tax burden from export duty on oil and petroleum products to mineral extraction tax (MET) on oil production. It envisages a gradual reduction in the rate of export duty on oil and petroleum products from 30% to zero in the period from 2019 to 2024 and a proportionate increase in MET.

On January 17, the International Monetary Fund (IMF) said in a statement that the multinational lender's medium-term outlook for Belarus is "subdued absent vigorous structural reforms, weighed down by unfavourable demographics and weak productivity".

At this juncture, medium-term growth is projected at 2%, limiting convergence towards the income levels of richer neighbouring countries, according to the IMF.

However, this modest outlook is "conditional" on full compensation from Russia for losses triggered by the so-called tax manoeuvre. "Should compensation be significantly less than full - and this is the key risk hovering over the Belarusian economy at this stage - medium-term growth could be materially lower than 2%, and the budget and current account deficits higher than projected above," the statement reads.