Belarusian economic growth will depend on Russia

The optimistic version of the Belarus’ social economic development forecast assumes GDP growth at 3.2% against 1% growth in the basic version. The practice of using two forecasts has proved to be efficient and allowed to balance the budget amid a decrease in oil supplies in H1 2017. In 2018, the optimistic version of the forecast could be fulfilled, should the Russian economy allow.

The pessimistic scenario of economic development in 2017 has permitted to create an income reserve due to a higher oil price as compared with the projected (USD 35 per barrel). The reserve has helped to compensate for the shortage in oil supplies, and the containment of budget expenditures has had a favourable impact on the national currency and allowed to support key sectors of the economy. In H1 2017, Belarus’ GDP grew by 1% and the state budget was executed with a surplus of BYN 1.3 billion or 2.7% of GDP.

Largely, Belarus’ GDP has resumed growth due to the increase in exports of Belarusian goods and growing prices on foreign markets. In January – May 2017, export prices increased by 19.2% while supplies increased only by 3.1%. More than 45% of all exports were to Russia.

Growth in exports and supplies is one of the main conditions for GDP growth at 3.2% in 2018. Russia will remain the key market for Belarus. The Russian economy is recovering from stagnation in 2017, but in the coming years its growth rate will be limited to some 2%. Demand for Belarusian products will be limited, and an increase in supply would only be possible in the case of lower prices. If oil prices go up, the Russian economy would accelerate recovery, however, GDP growth rates in Belarus would be 0.5%-1% below that in Russia. To achieve 3.2% GDP growth in Belarus, the Russian economy should grow at 4%, which is unlikely.