Belarus’ government abandons ambitious development plans before presidential elections
Belarus’ socio-economic development forecast for 2015 is rather modest in comparison with 2014. Just ahead of the presidential campaign, the authorities have abandoned their intentions to improve living standards. In addition, Belarus’ economy could face recession due to the situation in the Russian economy.
On October 3rd, Belarus’ socio-economic development forecast for 2015 was released to the public.
The 2014 forecast envisaged GDP growth at 3.3%, inflation at 11% (December 2014 to December 2013), a boost in exports of goods and services at 8.6%, and raising USD 4.5 billion in net foreign direct investment. As of September 2014, inflation was higher than 12% and the forecast was revised upward to 17%. Exports have not boosted, rather dwindled by 1.1%, in H1 2014 FDI was only USD 1.3 billion and GDP grew only by 1.5%. GDP growth forecast for 2015 is around 2%-2.4%, inflation at 12%, and exports growth at 4.3%. Such a forecast means that the authorities have lowered their expectations regarding Belarus’ economic growth in 2015.
As a rule, before the presidential campaigns, the authorities strive to demonstrate growth in GDP, people’s real incomes, and exports. Meanwhile, the 2015 forecast implies that the authorities are seeking to secure a stable and low economic growth rate, rather than an inflated one that would seriously weaken the national currency. The Belarusian authorities are not aiming high in terms of GDP growth. This is also due to stagnation in Russia and Ukraine as well as the world’s economic slowdown. All in all, the projected economic forecast is quite realistic.
The situation in the Russian economy could be the only threat to Belarus’ 2015 forecast. Belarus’ exports to Russia make up 42% of the total exports. In addition, USD 2.8 from USD 3.1 of Belarus’ public debt is owed to Russia. EU and US sanctions on Russia might reduce investment activity on the Russian market, and further reduce exports of investment goods produced in Belarus. Also, they might affect Russian banks and the government in terms of their ability to issue loans for the Belarusian economy. Moreover, restricted access to new technologies in the oil extraction industry might reduce oil extraction volumes, which would reduce Russia’s proceeds and have a multiplication effect on the Russian economy as a whole. Belarus is unable to influence sanctions and will be prompted to readjust her economic development forecast for 2015 if recession in Russia deepens. .
The Belarusian authorities have chosen a balanced approach to economic growth in 2015 and do not intend to pump the economy with printed money. If sanctions on Russia are stepped up, that will have a direct impact on the Belarusian economy. In addition, President Lukashenko might review the government’s plans, as he has done many times before, and recommend revising the forecast parameters upward.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.