Belarusian GDP resumed its fall signalling of unresolved economic problems
In July 2016, GDP fell by 2.7%. Curtailed oil supply from Russia has demonstrated the Belarusian economy’s heavy dependence on the refinery. In the given circumstances, the Belarusian authorities have limited ability to influence the situation in the economy and are likely to wait for external factors to improve.
According to the National Statistics Committee, in January-July 2016 Belarus’ GDP declined by 2.7% compared to the same period in 2015. In H1 2016, GDP fell by 2.5%. Over the past five months, there was a consistent reduction in the GDP gap as compared with 2015. In January 2016, the decline in GDP was 4.4%. Only agriculture, mining and transport industries have demonstrated growth. Construction, wholesale and retail trade and industry have major negative impact on GDP.
In July 2016, GDP dynamics changed, which was due to several factors. Firstly, petroleum production fell sharply in July 2016, which was likely due to curtailed oil supplies from Russia, amid Belarus’ overdue debt for Russian gas. In addition, Belarus could no longer re-export Russian oil products as anti-oxidants, which had a negative impact on chemical production in the Vitebsk region.
Secondly, in July 2016, motor vehicles production reduced sharply. Finally, falling cash incomes of the population reinforced the negative trend in retail sale, where performance slumped in July 2016.
GDP fall in July 2016 implies that imbalances in the Belarusian economy have not disappeared. Exports remain poorly diversified; a list of major exports is limited; and any problems with the oil prices or reduced demand for oil, petroleum products or food industry lead to reduced production throughout the country. The fall in exports cannot be compensated with other exports due to their low specific weight in the foreign trade turnover. Sometimes Belarus benefits from her transit position and re-exports goods to Russia, but the latter has learned to reveal such schemes and to use them to apply pressure on Belarus where needed. That said, Belarus has limited opportunities to resume economic growth. As Belarus has no plans to improve the investment climate, she may only hope for external factors to improve.
Amid economic imbalances and the lack of desire to carry out structural economic reforms, the Belarusian authorities may only rely on external factors to improve, since their reserves to influence the economy are limited.
According to the National Bank, in May 2017 consumer debt on consumer loans increased by BYN 136 million or 7.2% and exceeded BYN 2 billion, which was the maximum increase in debt over the past few years. The increase in demand for consumer loans has occurred after the requirement for a mandatory certificate of income was lifted, which simplified the procedure for obtaining a consumer loan. In the future, more banks are likely to issue loans without income certificates, the competition on the consumer lending market is likely to increase. Loans are likely to be issued in the form of instalments without paying the initial instalment and lower interest rates in the economy would reduce the instalment costs for businesses and reduce possible overpayments for consumers. The growth in wages stepped up retail turnover by 0.3% in H1 2017. Easier access to consumer lending could lead to an increase in unplanned purchases and boost retail turnover by 1-2 percentage points by the end of 2017.