Population 9.386 million
GDP 58.215 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
7.6 |
5.3 |
2.5 |
4.0 |
|
Inflation (yearly average) (%)
|
7.7 |
53.2 |
70.0 |
35.0 |
|
Budget balance (% GDP)
|
-1.8 |
3.1 |
-1.0 |
-0.8 |
|
Current account balance (% GDP)
|
-15 |
-10.4 |
-6.1 |
-7.0 |
|
Public debt (% GDP)
|
41.0 |
50.6 |
37.7 |
34.0 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Strategic position between Europe and Russia
- Qualified labour force and good infrastructures
- Lowest poverty rate in the CIS countries
WEAKNESSES
- Economy highly regulated by the state and little progress on reforms
- Structurally high current account deficit
- Risk of liquidity crisis
- Heavy economic and financial dependence on Russia (30% of exports, 60% of imports)
Risk assessment
Growth hampered by macro-economic adjustment
Growth slowed strongly in 2012, hit by economic contraction in the eurozone and slower growth in Russia. Activity is expected to be steadier in 2013, driven by private consumption, encouraged by wage rises, recovery in investment and construction. Agricultural (cereals, milk) and industrial production will continue to grow.
Inflationary pressures were strong in 2012, fuelled by higher tariffs (electricity), rising food import prices and also by the maintenance of an accommodative monetary policy (the Central Bank cut its rate from 45% to 30% during 2012). Although slowing, inflation will remain high in 2013, sustained by domestic consumption. This will affect the export sector’s price-competitiveness and the net contribution of exports to growth will remain negative.
Fiscal deficit under control but a worsening current balance
To control spending without halting wage rises (30% in 2012), the government is cutting investment spending. The decline in revenue linked to the slowdown of the economy resulted in a slight deficit in 2012, which will persist in 2013. The state’s need for finance is not fully covered by the loan of $3bn granted by the Eurasian Economic community (EURASEC). Negotiations with the IMF for the award of further aid have failed due to insufficient commitment to structural reform. Public debt, which had almost doubled since the 2011 devaluation, fell distinctly in 2012 and is expected to stabilise in 2013. However, the foreign exchange portion will increase substantially, giving rise to a risk of default in the event of a further depreciation of the rouble.
The current account deficit recorded in 2012 will increase slightly in 2013. Belarus imports Russian oil and gas, the prices of which are subsidised, and re-exports them to Europe. The gas price hike announced by Russia (12% in 2012) will increase the cost of imports, the volume of which will also grow due to increased domestic demand. Moreover, sales of metals and minerals (40% of exports) will continue to be hampered by less vigorous growth in Russia and the slowdown in the eurozone, widening the current account deficit.
Net foreign direct investments will remain weak, given the rather unattractive political situation and business environment.
The Central Bank’s level of reserves is extremely low (1 month’s imports), exposing the country to a significant liquidity risk. The banking sector has been weakened by the devaluation and the financial crisis. It remains very vulnerable to a worsening of the economic situation which would increase the number of doubtful loans and threaten the solvency of the banks.
Growing dependence on Russia and political weakness
Belarus seems increasingly isolated and dependent on Russia. The economic sanctions imposed by the EU and the United States will be maintained as long as the government of A Lukashenko fails to make any move towards greater political openness. Despite President Lukashenko’s determination to preserve his country’s political independence from Russia, the economic integration of the two countries is becoming significantly stronger. Belarus is very dependent on Russia for hydrocarbon purchases and financial assistance, and also through the stakes held by Russian companies in the economy. Gazprom, since purchasing 50% of the capital of Beltransgaz (a condition for Belarus to continue benefitting from subsidised gas prices), is now its sole shareholder and Russian companies intend to take full advantage of the programme of the privatisation of public assets planned for 2013.
The September 2012 legislative elections, boycotted by a large part of the opposition (which is therefore not represented in Parliament) were judged “neither free nor fair” by western observers. The leaders of opposition, which remains weakened, have left the country. But a deterioration of the economic situation, challenging the wage rises and social benefits currently making for relative social stability, could trigger unrest, raising fears of violent repression.
