Belarus’ economic performance in 2015 depends on oil prices

April 22, 2016 19:38

The Belarusian government has envisaged economic growth in 2016 at 0.3%, based on the annual oil price of USD 50 per barrel on average. Due to slumped oil prices in late 2014 and early 2015, the economic forecast for 2015 was not met. If oil prices remain at USD 40 per barrel, the 2016 forecast will not be met either, and the Belarusian rouble exchange rate will require adjustments.

Belarus’ socio-economic development forecast for 2016 envisages GDP growth at 0.3%, inflation at 12% and BYR exchange rate at 19 350 per USD 1 by late 2016, excluding planned denomination. Its forecast for 2016 the Economy Ministry based on the Russian forecast of Economic Development 2016, where the annual average exchange rate of the Russian rouble was projected at RUR 63.3 to the US Dollar, and the price of oil at USD 50 per barrel.

In 2015, Belarus’ GDP growth would be around 0.2-0.7%. In January – November 2015, Belarus’ GDP fell by 3.9%, while BYR depreciated against the US Dollar by 70%, and the majority of projected development indicators in foreign trade and industry were not achieved. A sharp fall in oil prices was to blame. The 2015 forecast envisaged oil prices at USD 83 per barrel and the Russian rouble exchange rate at RUR 43 per USD 1. Meanwhile in late 2015, the oil price is around USD 45. Low oil prices have led to a weaker Russian rouble, a recession in Russia and a drop in export of Belarusian goods to Russia.

The Belarusian economy is heavily dependent on the Russian market situation. Belarus’ exports to Russia make over 40% and more than 95% for some foodstuffs, such as cheese, beef, and sausages. The Russian economy is largely dependent on the oil price. With a further slump in oil prices to USD 40 per barrel, the Russian rouble may devalue to RUR 75 per USD 1, and the Russian economy will continue to stagnate, which will further reduce demand for investment and consumer goods from Belarus. Belarus may face difficulties with repaying her public debt due to reduced volume of export duty on oil, which is listed in the Belarusian budget. That said, the Belarusian currency depreciation by circa 15%-20% may be inevitable, and the majority of the forecast parameters for 2016 will not be met.

Overall, overestimated oil prices for 2015 have led to non-fulfilment of most socio-economic development parameters in Belarus. If oil price stays around USD 40 per barrel or lower, the Belarusian rouble will have to be devalued and the 2016 forecast will be failed.