Belarusian economy cannot withstand salaries above USD 600 per month

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April 22, 2016 19:00

In September 2014, wages in Belarus fell below USD 600. Poor diversification of Belarusian exports makes wage growth impossible due to problems with sales on the Russian market. In addition, the economic authorities in Belarus are no longer obliged to demonstrate the economy’s social achievements for the sake of the upcoming presidential elections.

In September 2014, the gross wage in Belarus was BYR 6 335 300 (circa USD 598). Wages have continued to fall for the second month in a row. Adjusted for inflation, real wages have declined over the past two months by more than 4%. Pay raises in education and healthcare have softened the general fall in wages in other economic sectors.

Wages cannot increase any more due to sales difficulties on domestic and foreign markets. Devaluation of the Russian rouble has meant that the investment activity of Russian companies has slumped, resulting in a 15-20% drop in sales for some Belarusian mechanical engineering products. Russia’s foodstuffs embargo has created conditions for Belarus to increase her food exports, but the sharp depreciation of the Russian rouble has resulted in significant losses in currency proceeds for Belarusian exporters.

Belarusian exports are poorly diversified and depend mainly on the Russian market. Belarus’ dependence on the Russian market is low only in the chemical and oil refining industries. Only domestic food and fuel have a considerable share in total sales on the domestic market. Most non-food products are imported on the Belarusian market.

Before the 2010 elections, gross wages in Belarus were artificially increased so as to demonstrate the benefits of the country’s economic policy. This has resulted in economic imbalances, current account deficit and, ultimately, in a significant devaluation of the national currency.

By 2015, the economic environment will have changed. The economy is no longer required to demonstrate a significant growth. Amid falling wages in Russia, wages in Belarus in some industries have caught up with those in Russia. Salaries of social workers in Belarus will grow, but simultaneously social benefits will be cut. Society will be satisfied with low incomes and a stable socio-economic situation in the country.

The Belarusian economy cannot withstand further growth in wages. The government will not raise the population’s standard of living artificially, and stagnation in the Russian economy will prevent a labour outflow from Belarus.

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