Updated at 11:59,19-05-2018

Expert: Salaries in $500 Can Ruin Whole Economy


Independent economists do not share the enviable optimism of the chairman of the National Bank Piotar Prakapovic in his forecasts of economic growth for 2010.

As www.udf.by already reported, the Government of Belarus had chosen the optimistic version of the socio-economic development in 2010, with the GDP growth of 11-12%.

Last week, during a report to Alexander Lukashenka, a potential Prime Minister of Belarus Piotr Prakapovich announced the preliminary parameters of the forecast. He said the GDP growth in 2010 should be not less than 11%.

However, according to "Zavtra tvoyey strany", state economists propose to provide for the GDP growth not less than 13%. It is such reinforcement to the Belarusian economy that is necessary to fulfil the 2006 five-year plan.

The head of the Analytical Centre "Strategy", economist Leanid Zaika called Prakapovich’s statements "political and propagandistic". He thinks that an economic growth by 2-3% next year should be considered "good". According to Leanid Zaika, the maximum possible growth is by 4%, and only for this "the prime minister can be awarded the title Hero of Belarus".

The economist of the Research Centre of the Institute of Business and Management Alyaxandr Chubryk told www.udf.by that there are several scenarios of economic growth in Belarus.

The first scenario depends on the recovery of those economies, into which Belarus exports its products. According to A. Chubryk, this option is unlikely.

"If the recovery begins, Belarus will have an opportunity for growth next year. But even according to optimistic projections, the opportunity will be small. I think we can hardly expect even the export level of 2008. This growth is not the one that can pull out the entire economy."

Moreover, as the expert said, we produce a significant part of the goods from imported raw materials. And this means that an increase in export will be followed by import growth, which will have a negative impact on the GDP.

The second scenario involves the growth of the economy from domestic sources. However, if the economic policy pursued by the state in 2009 continues then we can say that the GDP growth is exhausted, said Alyaxandr Chubryk.

"Already in the third quarter of 2009 domestic demand almost did not increase, and the limit of this growth has already come," the economist believes.

The GDP growth is also possible if next year Belarus manages to attract a considerable amount of external debt (that is, to get new loans) or a very large volume of foreign investment. According to A. Chubryk, investments should be measured at 5 – 8 billion dollars.

"But this requires a fairly radical change in economic policy, including the investment climate", said the expert.

It should be mentioned that independent economists are sceptical about the possibility of attracting significant foreign investment in 2010. Consequently, Belarus won’t be able to count on "the investment scenario" of rapid growth of its economy.

Evaluating the prospects for economic growth, Alyaxandr Chubryk noted that in the history of Belarus after the collapse of the Soviet Union there wasn’t a single year when GDP would grow to such a rate as officials plan.

"The GDP grew at a maximum of 11,4% in 1997 when we had a very favourable market conditions in Russia, and a soft policy was carried out which gave our companies a price advantage. A similar significant increase was in 2004 when there was a tremendous upsurge on Russia market. Oil prices were growing; there was a rise of the global economy. That is, there was awfully favourable external environment."

Therefore, historically the figure of 13% seems very unlikely, summed up the economist of the IBM Research Centre.

But the salary of $500 promised by the authorities is, according to the expert, much more attainable, because it is "a merely political goal".

To reach it, "the whole economy can be sacrificed", says Alyaxandr Chubryk.

"To do this is not difficult. It is necessary to significantly build up the external debt and spend the money to pay salaries. Well, then this salary will be rapidly dissolved after the devaluation and consequent economic problems", the expert explained.

It will be recalled that in late 2010 – early 2011 presidential elections will be held in Belarus. Generous social and economic promise on the threshold of the election campaign has become a habit of the Belarusian authorities. As practice shows, the consequences of such promises will not take long to appear.