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.
The diversification of the military-technical cooperation between Belarus and foreign states is a long-term trend. In addition, Belarus aims to start producing some weapons and military equipment crucial for national defence.
Last week, Kazakhstan hosted the VIII meeting of the Sub-Commission for military-technical cooperation of the intergovernmental Kazakh-Belarusian commission for trade and economic cooperation. For obvious reasons, details have not been disclosed, however, the Belarusian delegation visited Kazakh defence enterprises Kazakhstan Paramount Engineering and Kazakhstan Aselsan Engineering, which was indicative. The first enterprise, a joint venture with the South African Paramount Group specialises in the production of wheeled armoured vehicles. The second, with the participation of the Turkish Aselsan, among other things, produces secure communication systems, reconnaissance and target designation systems. These products are among the priority for the Belarusian military-industrial complex.
Earlier it was reported that the contract signed in 2015 for the delivery of Russian wheeled armoured vehicles to Belarus remained unperformed. President Lukashenka demanded that the national army gave priority to domestic products. In addition, the Belarusian military industrial complex had previously showed the ambition to establish the production of gun-type wheeled armoured vehicles.
In addition to Kazakh products, Belarus could be interested in Kazakhstan’s experience in organising joint production in the military-industrial complex. Such interest was stated at the highest level.
In the last decade, Minsk was consistently expanding the geography of the military-industrial cooperation. Simultaneously, it sought to reduce the dependence on defence supplies from Russia when it made economic and technological sense. In addition, the very fact of having partners other than Russia in such a sensitive sphere as the production of weapons is politically important.
Minsk has the incentive to seek new partners and deploy own defence production due to the problematic nature of Belarusian-Russian relations and Moscow's refusal to supply weapons and military technologies, which has prompted Belarus to producing own missile weapons (for example, the MLRS Polonaise).