Updated at 10:57,21-08-2019

Belarusian government unable to ensure economic growth above 3% per year until 2020

Belarus in focus

The Belarusian government plans to increase GDP by at least 10% in 2016 -2020. The new five-year development programme has reduced quantitative parameters to a minimum due to past implementation failures. Instead of expected growth, the Belarusian economy is likely to shrink due to the lack of structural reforms and limitations on administrative lending to the economy.

On April 5th, the Belarusian government presented the 2016-2020 socio-economic development programme. During this period, Belarus’ GDP is envisaged to increase by at least 10%, international reserves to increase up to three months worth of imports, and the balance of payments to be financed without new loans.

In order to achieve these goals, the government is set to reduce interest rates in the economy, which by the end of 2016 should not exceed 27%, and to transfer loss-making enterprises to effective owners. The share of exports to new promising markets in 2020 is expected to grow from 5% to 10% with a gradual increase in the share of services in total exports from 20% to 25%.

Quantitative indicators of the 2011-2015 development programme were failed. Instead of projected GDT growth at 62%-68% over 5 years, Belarus’ GDP grew by only by 6%. Belarus has not attracted foreign investors - foreign direct investment in 2015 totalled USD 1.6 billion, instead of projected USD 7.5 billion. Real wages of the population increased by 34% instead of projected 70%-76%, and the Belarusian rouble was devalued thrice. Belarus has achieved a positive balance in foreign trade in goods and services, but to a lesser extent, than the planned 0.5-0.6% of GDP due to a significant slump in production volumes.

The government’s forecast for 2016-2020 is based on the baseline scenario, which envisages economic growth at 0.3% in 2016. The oil price is envisaged at USD 50 per barrel, which could lead to the Russian economy growth at 1% and an increase in supply of Belarusian products on the Russian market. However, amid current trends, oil price is unlikely to reach USD 50 per barrel in 2016, entailing deeper recession in Russia and adjustments to the Belarusian export plans.

The Belarusian authorities are not envisaging structural economic reforms, and likely to enhance pressure on the large Belarusian business to replenish the budget, which would not improve the investment climate in the country and would not create new jobs. If Belarus receives the USD 2 billion loan from the EFSR, she will be restricted in stimulating the economy by emission. That said, economic growth at 3% per year (the world’s average) is virtually unattainable. If Belarusian socio-economic model is preserved, GDP is likely to continue to fall until 2020.

Overall, even a positive socio-economic development scenario does not envisage a significant economic growth in Belarus. Amid low oil prices and the lack of reforms, the Belarusian economy is likely to continue to contract in the next five-year cycle.