Belarusian exports hit the bottom
On October 31st, Belstat published the January – September 2013 foreign trade data.
Belarus’ foreign trade is highly dependent on a narrow range of exported goods. Export growth potential is insignificant. Although modernization has partially improved export opportunities, any positive effects have been offset by growing exports of equipment and ill-conceived business plans.
In September, the foreign trade in goods deficit was USD 484.5 million. The main reason for this was a decline in exports to USD 2.925 billion, the lowest level since February 2011. The decline in exports was due to the drop in Belarus’ main export items – petroleum products, potash fertilizers and machinery. Production of petroleum products directly depends on the volume of supplied raw materials for processing, and in the case of Belarusian-Russian conflicts, the latter exerts pressure by limiting the oil supply to Belarus. Exports of potash fertilizers have suffered after the breakup between Uralkali and Belaruskali and will not be improved because the market prices keep falling. Mechanical engineering is dependent on the Russian market: the drop in investment demand from major customers has resulted in a sharp drop in sales, which cannot be compensated by sales in other markets. Other export items are too insignificant to affect the overall picture.
For instance, Belarusian dairy products are in great demand on the Russian market in 2013. Dairy exports are constrained by the shortage of raw materials to produce milk powder, casein, and cheese. Sugar has high export growth potential due to poor harvest in Russia. In addition, Belarus has started producing Chinese cars – Geelly, with a clear orientation on the Russian market in the future. However, even if Belarus increases exports of these items and earns up to USD 200 million per month, this will not be enough to remedy the situation.
The industrial modernization was held to expand the range of export products and their exports on foreign markets. In some cases, it worked out: for example, with some Grodno Azot products or chipboard exports. However, these are rather exceptions than a rule. Most often, modernization has resulted in increased imports of production equipment and negative output.
Modernization in Belarus has failed to diversify exports. Belarus needs not only new technologies, but also new managerial approaches, which are not feasible in the current environment.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.