Foreign trade results approximate devaluation

April 22, 2016 18:45

Belarus’ foreign trade performance in 2013 made a positive forecast for 2014 unrealistic. Only a few export goods have growth potential. Belarusian goods can compete on foreign markets only if the Belarusian ruble weakens considerably, in particular, taking into consideration ruble devaluation in Russia, Belarus’ main trade partner.

The foreign trade deficit in 2013was USD 5.8 billion.

Belarusian exports in 2013 amounted to USD 37.2 billion – a 19.2% decrease compared with 2012. While exports of foodstuffs and woodwork products were growing, Belarus’ main exports, i.e. petrochemicals, potash fertilisers, machinery, ferrous metals and tyres had fallen. Belarusian enterprises have not managed to diversify their exports in previous years. As a result, they could not overcome negative trends in the Russian economy and compensate the reduced demand on the Russian market with exports to the third countries.

In 2014, Belarus’ major exports will be potash and nitrogen fertilisers, cars, foodstuffs, building materials. BPC and Uralkali managers have met recently, which may indicate their interest in joint action on the potash market, which is expected to grow by 10-15% in 2014. Kazakhstan is interested in affordable cars from Belarus and they do not have the utilisation fee, which makes Belarus-made cars competitive on this market. Belarus-made foodstuffs are popular on the Russian market and, despite Russia’s attempts to restrict imports from Belarus, she may increase her exports in 2014. Belarus has signed contracts with Russia to supply cement and building construction materials.

The major problem for Belarus’ exporters in 2014 will be fluctuations in the Belarusian ruble exchange rate. In January, Russia weakened her ruble to the currency basket by 7.2%. On February 7th, Ukraine officially devalued the hryvnia by 9%, meanwhile, in January the Belarusian ruble strengthened its positions to the currency basket. As a result, Belarusian exporters, yielding revenues in Russian ruble and the hryvnia, suffer losses due to the weakening of these currencies. Exporters have to compensate their losses by raising prices, on both foreign and domestic markets. As a result, Belarus’s exports to Russia and Ukraine may fall. It would make perfect sense to devalue the Belarusian ruble – at least by 7% – to save Belarusian exports, but this approach is not shared by the country’s leadership, who want to demonstrate their financial management skills ahead of the World Hockey Championship, an important image-making project for Belarus.

When the World Hockey Championship finishes, devaluation may follow. The delay with devaluation may deteriorate the foreign trade situation and lead to losses in export volumes in 2014.