Belarus will meet inflation forecast for 2016
In January - November 2016, consumer prices in Belarus grew by 10.1%. Unlike in recent years, there were no major price hikes in 2016 due to the stability of the BYN exchange rate and frozen pay rises. The forecast for inflation in 2016 at 12% will be met, which will allow to reduce interest rates in the economy.
According to the National Statistics Committee, in November 2016, consumer prices rose by 0.8% and overall inflation since the beginning of the year totalled 10.1%. In 2016, housing and utility services costs grew most rapidly: technical maintenance costs increased by 63%; lift usage, heating and sanitation costs by more than 40%. Housing and utility costs went up due to the government's plans to reduce cross-subsidies in the economy in order to end subsidies entirely by 2018. Food prices went up by 9.4% in 2016 and prices on other consumer goods by 7.4%.
In previous years, devaluation was the main driver of price hikes in the Belarusian economy. Devaluation of the Belarusian rouble led to higher prices for imported goods. In addition, Belarusian producers used a lion’s share of imported raw materials, which led to subsequent price hikes on domestic products. In January-November, 2016, the Belarusian rouble depreciated against the US Dollar by 6.3% and against Euro by 3.3%. People’s additional income thanks to pay rises was absorbed by a rise in the utility costs, leading to reduced demand and lower prices on imported consumer goods.
According to the government's forecast for 2016, inflation should not exceed 12%, which would be the minimum value for the last six years. Housing and utility costs will continue to increase in early 2017. As a rule, prices on seasonal fruits and vegetables go up in December. Hence, in order to contain inflation in December, the authorities are likely to fix prices on some produces and announce sales on a wide range of food and non-food items. In addition, the regulatory bodies may implement price monitoring in trade networks and apply administrative measures to suppliers and manufacturers who increased prices unreasonably. In 2016, Belarus is likely to fail most economic forecast indicators and the economic authorities will aspire to demonstrate positive trends in the economy. Thanks to administrative means, inflation in 2016 is likely to remain within the limits of the forecast, which will allow to lower interest rates in the economy and reduce the enterprises’ debt burden vis-a-vis the banks.
Overall, the stability of the Belarusian rouble in Belarus has had a moderating effect on prices. Taking into account the administrative resource possibilities, the inflation forecast for 2016 will be met and interest rates in the economy will continue to reduce.
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.