In 2013 the economic growth will be attributable to domestic demand
The Ministry of Economy’s plans for 2013 indicate that the old ways to accelerate the economic growth will be used. The risks of external markets shrinking and vague shapes of the ‘new’ economic policy imply that projected parameters may not be achieved.
Last week, the Ministry of Economy published a report by Economy Minister Nikolai Snopkov “Projected social and economic development of Belarus in 2013”.
The Ministry of Economy plans to base the Belarusian economic development until 2015 mainly on the growth in domestic demand. A detailed diagram of projected economic growth in 2013 by economy sectors shows that old methods, proven by time and repeated devaluations will apply to pump the GDP up. Growth of the added value in construction is projected at 8%.
Construction workers’ salary increases, used to retain workers, will impact on the cost of a square meter. Increased housing construction plans will require additional loans, mostly on preferential terms as the population cannot cover the construction costs from their own savings. In previous years this has resulted in the emission pumping of the economy and economic imbalances. The repetition of this scenario is highly probable. If there is a serious resistance to increasing of the preferential lending, this growth level will be unattainable.
Trade growth by 11% indicates a possible increase in incomes due to higher wages. This will impact on the growth of costs at industrial enterprises and the current trend (loss of traditional markets and even of some partners) may deteriorate due to the decreased competitiveness in foreign markets. Against the background of the possible crisis, even 3.7% export growth is questionable. The suspended solvent sales will not allow for the chemical industry’s growth up to 13% in the coming year.
The report is internally inconsistent: on the one hand, it points to a new high-tech sector, which will be created through FDI and on the other hand, it shows a downward trend in the share of high-tech products in all exports. Moreover, the business environment for investments in Belarus is even worse than the Customs Union partner countries. Given the way the existing business liberalization directives are implemented, optimism in this part seems overly ambitious.
Therefore the projected results are hardly achievable. The ‘traditional’ ways of pumping the economic growth carry the risk of 2009 and 2011 crisis recurrence against the background of the due high foreign debt repayments.
President Lukashenka has met with the head of Chechnya Ramzan Kadyrov, who visited Minsk and the Minsk Automobile Plant. Minsk has always sought to have independent links with Russian regional elites, partially, to compensate for the Kremlin's diminishing interest in Belarus. In recent years, Belarus’ contacts with the Russian regions have been extremely intense. However, with some leaders of Russian regions, primarily heads of large republics, communication was more difficult to build. As many analysts in Minsk suggested, Minsk could regard contacts between President Lukashenka and the head of Chechnya as an additional communication channel for relieving tension in relations with the Kremlin. However, most likely, a trusting relationship with Kadyrov is a value for Minsk as such, provided Kadyrov’s broad business and political interests, and a high degree of autonomy for the Chechen leader from the Kremlin.