Updated at 21:48,17-09-2020

Vadzim Iosub: No instant impoverishment - we will be stepping into this state steadily and smoothly

Piotr Kuchta, EuroBelarus

The current economic situation is “freshly challenging” for reforming the Belarusan model; however, the problem is that the authorities “do not give active response to these stimuli”.

“Black Monday” in the oil market that was predictable due to abolition of sanctions against Iran and recurrence of Iranian raw materials to the European market didn’t take place. Let us recall that the most radical forecast for January 18 was $17-18 per barrel of Brent.

Vadzim Iosub, senior analyst of “Alpari”, forecasted the backward movement of prices on oil. “Bearish play was taking place for too long. It’s time to take profits now,” – the expert wrote in his Facebook.

“When Asian markets opened, oil really dropped by about $1.5 compared to the markets’ close on Friday. However, after that the price was only growing. I.e. the expected sharp “bounce” didn’t prove to be correct, though the collapse didn’t happen either”, - Vadzim Iosub summed up the results in the oil market on January 18 in his comment to the “EuroBelarus” Information Service.

Meanwhile, the situation in the Russian economy (fall of the Russian ruble after the fall of prices on oil and so on) feeds disastrous expectations in Belarus, too. Say, the surprise of December 2014 might be repeated, when momentary devaluation by 30% took place.

“I don’t support it when the term “devaluation” is used incorrectly for the current Belarusan situation. This term is usually used for administrative fixed price formation, when the currency rate is kept at one level until the power to keep it at the same level runs out and the currency rate is released to reach a different level. We have floating currency rate now; moreover, lately dollar rises in price by 200-300 rubles daily. For that matter, we can say that devaluation is happening every day. Now we witness quite sharp fall of the Belarusan ruble and there is no information that its slow devaluation will stop”, - Vadzim Iosub noted.

Let us recall that the average annual Belarusan ruble rate that the authorities put in the budget for 2016 is 18600 rubles per dollar. However, Vadzim Iosub sees nothing disquieting in the situation where the prediction of ruble crushed in the first weeks of the new year: “Indeed, the average annual dollar rate has already been surpassed, but, as a matter of fact, the average annual dollar rate is not a criterion, but just a factor. The budget is in the national currency; however, it includes foreign exchange income and expenses - and it is essential to convert these items to rubles at some exchange rate. The authorities come up with this average annual rate, and even if went wrong with numbers, nothing catastrophic happens to the budget anyway. It just means that the foreign currency income and expenses have higher ruble equivalent. Nobody expected high accuracy from that forecast. And the fact that it is unreal was mentioned as early as the government forecasts for 2016 were announced."

The analyst noted that "Belarus' dependence on the Russian economy is high, but fortunately, not absolute." " I completely share the alarming forecasts about the Russian economy; nothing augurs well to the Belarusian economy either, but we have certain directions that are almost independent from Russia. For example, exports of petroleum products to Europe and Ukraine, export of potash fertilizers. At least there is a chance that the talks about the need for geographical diversification of exports and the need to move away from such a high dependence on the Russian market will be put in action. This is a very freshly challenging situation, but the problem is that the Belarusian authorities somehow do not actively respond to these incentives,"- Vadzim Iosub says.

There won’t be a monetary apocalypse in Belarus in the near future, the analyst believes. "We don’t have currency deficit yet, although there were some anxious moments when literally 2-3 banks were trying to introduce limits on the sale of foreign currency, but the National Bank quickly rebuked these banks. Of course, a "catastrophe" makes a good headline, but a recession, that is, slow economic decline, slow decline in real wages, decline in living standard is the more likely scenario. We will be stepping into this state smoothly," - Vadzim Iosub assumes.