Possibilities of ‘regulated’ GDP growth are limited

On April 12^th Belstat published Q1 2013 Belarus’ GDP growth data.

By the end of Q1 2013 GDP growth started to slow down. GDP growth was largely due to the use of Belarus’ traditional ways to adjust the GDP upwards and does not reflect the real economic situation. Means used, have limited potential impact and can not mask the growing problems in the economy.

In Q1 2013 GDP growth in Belarus was 3.5% against the same period in 2012. During the first two months, GDP growth rate was 4.4%. Belarus’ economy is experiencing a slowdown, which is mainly caused by the situation in the industry. In Q2 the downward trend in GDP growth will continue due to the high comparison base of Q2 2012. In Q1 and Q2 2012 there was a a considerable increase in production of solvents, lubricants in the chemical industry and in production of bio-diesel by refineries.

The relatively modest GDP growth against the projected 8.5% growth for 2013, were not achieved due to the economic growth, but mainly by manipulations and by using Belarus’ conventional techniques to show GDP growth. Heavy engineering industry experienced problems with exports, which could derail the industrial production growth rate, and consequently the GDP rates to invalid values. Given the circumstances, Belarusian industry resumed its conventional practices of showing GDP results by stocking goods at warehouses. In Q1 2012 stocks have increased by BYR 10 trillion, which is BYR 5 trillion more than in the whole of 2012.

Another source of GDP growth was the inclusion into the used investments the current investments by foreign organizations carrying out their activities without forming a legal entity in Belarus. Earlier such investments were included in the overall investment volume only after commissioning. The large-scale industrial modernization with Chinese loans and overdue deadlines for a number of investment projects resulted in the methodology changes and current investments were included in the overall investments.

Methodological manipulations have allowed to some extent to adjust the GDP growth pace upwards. However these adjustments have certain limits. In Belarus there are no alternative schemes which could affect GDP growth, similar to the schemes with solvents and lubricants. Attempts to solve the problem of reduced industrial output by manipulations with methodology do not really work. The uncertainty with the heavy mechanical engineering exports also adds up to the problem.

Thus, methodological manipulations with the GDP showed some distorting effects , but their impact has certain limits and further manipulations will not result in significant improvements in statistical terms.