Updated at 14:58,21-10-2016

Only revolution to save Belarusian economy, Leonid Zlotnikov says

26-09-2012, 18:20
Only revolution to save Belarusian economy, Leonid Zlotnikov says

"There is nothing to hope for, unless a revolution and a sudden transition from socialism to capitalism to happen in the economy. Next year won't be the year of stabilization, a collapse awaits us," economist Leonid Zlotnikov told UDF.BY while commenting on the Social and Economic Development Forecast for next year and the 2013 Monetary Policy Guidelines, which were enacted by Alyaksandr Lukashenka on September 25.

The Social and Economic Development Forecast projects a GDP growth of 8.5 percent, a 15.2-percent increase in the export of goods and services, an export surplus amounting to $500 million, or 0.7 percent of GDP, a seven-percent decrease in the energy intensity of GDP, and a six-percent increase in fixed capital expenditures.

The government expects that the nation will export $53 billion worth of goods next year, well above the $45 billion target for 2012, with the industrial sector to account for 90 percent.

Housing construction is slated to total 6.5 million square meters against 4.2 million square meters in 2012.

Net foreign direct investment is expected to total $4.5 billion.

The population’s real disposable money income is projected to grow by 6.5 percent.

Leonid Zlotnikov commented on the Forecast to UDF.BY.

- I think the developers themselves do not believe in the reality of these forecasts. They just carry out orders. These forecasts can be implemented in the presence of a number of conditions (a balanced budget, no inflation), as it was said by Myasnikovich. And this is unrealistic.

Therefore, the 2013 won't become the year of economic stabilization. If not in the end of this year, then at the beginning of the next a collapse awaits the country. The country has no capacity to support fixed wages. GDP indicates the level of the country's capabilities. Level of real income will remain at the level of 20 percent with a GDP growth of 3-5 percent.

Additional $7-8 billion is needed each year in order to maintain a high level of consumption. There is no money to pay off the foreign debt, and it looks like there will be no new sources of revenue.

Why will the next year be better than the current? It will only worsen. Competitiveness of our economy is getting worse, while the competition is increasing. Russia has become a member of the WTO and opened its markets to the world's goods. Belarusian pork is no longer needed in Russia. Free trade zone of the CIS has started to function since September 20 and cheap goods from Ukraine have started to flow.

There has been a marked decline of mechanical engineering, which is largely export-oriented. And we can do nothing without exports.

- State media forecast the ruble rate in a strange way. According to it, Belarusian ruble exchange rate will be based on demand and supply of foreign currency ...

Calculations are made on the basis of the dollar rate of 8500 rubles. Ends do not meet here.

In the first half of 2012 the dollar exchange rate fell from 8500 to 8300 without any effort of the National Bank. The National Bank did not do anything, and the rate fell for objective reasons.
But the situation has changed in the second half of 2012. There are no Russian solvents and diluents anymore. The inflation is above the forecast one, in order to maintain high demand foreign currency is needed. Reserves are eaten. There are not enough foreign exchange reserves for everything, and it looks like there will be no in future. Foreign exchange reserves are not formed for this, therefore there will be inflation and devaluation.

But all is not fatal. If the authorities refuse from state socialism, which is based on Article 2 of the Civil Code, if there is a sharp turn from socialism to capitalism in the economy, the economy can be kept.

I remember when the Belarusian economy was falling into an abyss from 1991 to 1993, and the government drew positive indicators all these years. It is easy to forecast the development of the economy, if its development is on a smooth path. But the Belarusian economy is in meltdown.

Let's look at the real dynamics. If we take January 2012 if as a starting point and conventionally denoted it by a unit, then there have been a catastrophic collapse of the industry during the last three months, that is, the level of production fell by 20 percent compared to January. GDP fell by 14 percent compared to January. Outflow of foreign capital amounted to $1 billion as of August 1.

We have a chance for a sudden change from the socialist model of the economy to the capitalist one. There is nothing to hope for, unless a revolution and a sudden transition from socialism to capitalism to happen in the economy.