Belarus’ prices are growing faster than wages

April 22, 2016 18:56

Since July 2013, thanks to high-profit economic activity, nominal wages increased by 18.4%. But due to growing food prices and utility tariffs, the population has not felt the pay-rise. The government’s measures aiming at pickpocketing Belarusians have affected the most vulnerable parts of society.

The National Statistical Committee reported that in July 2014 real wages decreased by 1.3% in comparison with July 2013.

In July 2014, the nominal wage in Belarus equalled BYR 6.5 mln (470 EUR) which is BYR 1 mln (73 EUR) or 18.4% higher than in July 2014. The wage growth was due to higher wages in electronic industry (over 20%), chemical industry, air transport and software development. Professionals working in these fields are among the highest paid in Belarus. Wages in other industries – especially in the social sphere – grew at a slower pace.

In 2014, the growth in nominal wages was offset by inflation. Compared with July 2013, consumer prices in Belarus increased by 19.8% by July 2014. Food prices increased by 21%, and the cost of services went up by 37.4%. Some tariffs have doubled – gas tariffs and preschool payments. Since prices have been growing faster than wages, people’s real wages decreased by 1.3% in comparison with July 2013. In September 2014, utility tariffs will be increased once again. In addition, greater demand for food products on the Russian market might trigger food price hikes in Belarus.

The Belarusian government has not bothered to combat inflation, because on the one hand, it could report about nominal wages growth, and, on the other hand, increased spending on services and foods has offset the growth. Therefore, additional revenues have not ended up on the foreign exchange market. The government justifies further growth in utility tariffs by comparing Belarusian tariffs with those in other countries with higher incomes, omitting, however, this last detail. Inflation disproportionately affects the most vulnerable parts of population – utility payments occupy the lion’s share in their households compared with their affluent fellow citizens. In the future, real wages are bound to decline, limited by labour productivity. Only highly profitable industries would be able to compensate their employees for the losses.

The state has once again found a way to pick citizens’ pockets. Despite the fact that Belarus declares itself as a welfare state, the earnings gap will increase. Labour shortages might soon hit some economic sectors, such as education, social services and healthcare.