Belarus’ government projects GDP growth at 2% in 2015

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April 22, 2016 19:00

On October 31st, the government issued a statement projecting GDP growth forecast for 2015 at 2%. This somewhat constrained optimism is due to the fact that Belarus will only be able to fulfil her projections if the external economic environment is favourable. However, so far, the external economic situation is not in Belarus’ favour and she has no means influence that.

In January-September 2014, Belarus’ economy grew by 1.5% (annual forecast is 3.3%), which was mainly due to growth in retail trade and industry. The retail trade grew thanks to nominal wage growth (compared with 2013) and industrial performance at Belaruskali and Belarusneft. Growth in sales of potash and petroleum products had a positive effect on the wholesale trade performance. The construction industry had a negative impact on GDP due to the completion of several major modernisation projects.

In 2015, the government projected GDP growth at 2% (IMF and WB – at 1.5% and EBRR – at 0.5%). The growth is projected due to greater proceeds in the modernised industries, i.e. woodworks and metallurgy. Potash production in 2014 has reached its capacity and has limited opportunities for further growth. Oil refining may count on larger production capacity only by 2016, thus will be unable to show substantial growth in 2015. In 2015, the government is planning to launch new projects in the pulp and paper industry; however, the demand may be lower than projected. In addition, people’s real wages are not projected to grow considerably in 2015, which will restrict growth of trade and consumer goods production.

The economic forecast for 2015 may not be fulfilled also due to external factors, such as the situation in the Russian economy. US and EU sanctions have led to the devaluation of the Russian ruble and the decline in real incomes. Russia’s investment activity is limited. Banks have problems with accessing financial markets, which has reduced Russia’s ability to finance the economy. For Belarus, it means a drop in demand for consumer goods (furniture, appliances, and cars), machinery (trucks, mining and road construction equipment) in 2015. To improve the profitability of export supplies, food producers will have to increase prices, which may lead to a decrease in exports of goods instead of the projected increase.

In 2015, the Belarusian economy will not have many sources to ensure growth, and everything will depend on the favourable external economic situation. If Russia continues her self-isolation policy, Belarus’ economic growth plans may be hampered, so as it would reduce the demand for Belarusian products in Russia amid fluctuating Russian rouble exchange rate.

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