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Is economic crisis in Belarus irreversible?

A few days ago, most of Belarusian mass media heralded that in Sept, Belarusian exports grew by 4% to $2.769bn (the highest level in 2016). That news might have encouraged the Belarussians, were it not for one “but” – the continuing economic crisis in their country.

In Jan-Sept 2016, the exports in Belarus dropped by 12.5% and could drop even lower, were it not for service trade, which grew by 0.8% to $4.986bn. Commodity exports during the same period dropped by 15.8%, resulting in a $1.348bn deficit (against $680.5bn a year before). In Jan-Sept 2016, foreign trade totaled just $43.429bn, which is 11.5% less than in Jan-Sept 2015.

This is not the first year Belarus is facing a drop in exports. Last year, the index dropped by 24.1% to $32.883bn. The local authorities have simple explanations for this: low oil and potash fertilizer prices and the unfair policy of the Russians, who are trying to keep high-quality Belarusian products away from the Russian market. Were it not for these factors, Belarus would have overcome the crisis and would have even recorded a 0.2% GDP growth.

But instead, the Belarusians are witnessing declining exports and incomes. In Jan-June 2016, 1/4 of Belarusian state-owned companies registered losses. These are official statistics, so, it is not clear what is actually going on.

The crisis has stricken not only industry and agriculture but also the banks. In Jan-Sept 2016, most of the Belarusian banks earned less than a year before. Even Belarusbank recorded a 16.7% cut in its net profit. And it is not yet clear if there will be any loans from abroad. In Oct, Belarus was supposed to receive $300mn from the Eurasian Fund for Stabilization and Development but is still waiting. This means that the Belarusian authorities have failed to meet their obligations. In other words, Belarus has no money and will hardly have any in near future. And even its Eurobonds will not help it.

It seems that some people in the government are becoming aware of the situation. Recently Lukashenko’s former economic advisor, Belarusian Ambassador to China Kirill Rudy dilevered a speech at a business forum in Minsk and said that the key reason why the Belarusian economy was declining are that the authorities were doing nothing to reform it. The audience reacted with a storm of applause. And among those present were not only businessmen but also top government officials, like Deputy Head of Alexander Lukashenko’s Administration Nikolay Snopkov, Deputy Economy Minister Alexander Zaborovsky and Deputy Chairman of the National Bank Dmitry Kalechits.

Experts say that this is not a wish to change anything for the better but just an attempt to make people ready for the worse. Quite recently, the labor and social security ministry said that despite the last “optimization,” the Belarusian companies employ 5.4% more people that they should need. According to the ministry, the unemployment rate in Belarus is not very high – just 13,800 people or 0.9% of the country’s work force. But last year it qualified 200,000 Belarusians as people actively seeking jobs and 1,400,000 more as other labor force (people who have found no jobs in Belarus and are working in Russia). In Jan-June 2016 Belarussian companies employed 260,700 people and fired 340,000 people, with more than half a million of Belarusians employed by companies facing a crisis.

One more proof that the Belarusian authorities are ready for the worse is their draft decree to raise the dole for two categories: those who have no more jobs because they have got laid off or because their companies have been shut down (almost $90) and those who have lost their jobs because of objective reasons.

This all proves that the Belarusian authorities are not ready for reforms and prefer using stopgap measures as a way to prevent a social upheaval. So, we can hardly expect structural reforms, privatization and staff reshuffles in Belarus. Even more, the Belarusian authorities may lose their only chance to stop their crisis – to get actively involved in the Eurasian cooperation project – for nobody in Moscow and Astana is going to wait for them forever.

Pavel Yurintsev

Permalink: eadaily.com/en/news/2016/11/10/is-economic-crisis-in-belarus-irreversible
Published on November 10th, 2016 10:53 PM
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