Belarusian government aims to achieve economic growth without monetary financing

Category status:
February 13, 2017 10:42
Фото: myfin.by

The economic authorities have decided against monetary financing to stimulate economic growth. Inflation in the economy has slowed down, albeit the economic performance was declining in the past two years due to the absence of incentives. The authorities are unlikely to start pumping the economy to stimulate growth due to the short-term potential economic impact and the loss of chance to resume credit programmes with international donors.

At a recent meeting, the Belarusian authorities decided against monetary financing of the economy. They will preserve the current credit and monetary policy, while retaining the task to increase wages to USD 500 per month. Joint actions of the National Bank and the government to curb the growth in credit to the economy led to a slowdown in inflation and some improvement in the economy in 2017. According to preliminary reports, in January 2017, the index of industrial production totalled 105.9% compared with January 2016, annual inflation slowed to 9.5%, the average interest rate on the credit market in January 2017 was 19.6%, and decreased by 15 per cent points in the last year.

In 2015 - 2016, the Belarusian economy was stagnating, mainly due to the tight monetary policy of the National Bank and the government. In order to overcome the devaluation, the growth in money supply in 2016 was limited to 19% with inflation at 10.6%, soft loans to industry were reduced, terms of loans were tightened and soft loans for housing construction to citizens were minimised. As a result, on the one hand, the national currency stabilized and strengthened against the US Dollar by 5.5% over the year. However, on the other hand, due to curbed loans in the economy, non-payments have grown in number, so as bankruptcies of state enterprises and almost 100000 people were laid off in different economic sectors.

In the given circumstances, the government was tempted to resume monetary funding of the economy to stimulate economic growth and achieve the task of the average wage at USD 500. In the short-term, that would lead to economic growth and wages would have grown up to USD 500 for some two months, however, later, the Belarusian rouble would have devaluated, financial health of successful businesses would have deteriorated, and wages would have dropped to USD 300 - USD 350 per months. These short-term economic effects and potential termination of talks on a new loan programme with the IMF and other international lenders, as well as negative effects on the economy have outweighed the need for a short-term conservation of the current economic model. Therefore, the authorities will continue implementing the tight monetary policy, albeit with minimal economic growth. That said, economic growth would depend not only on the actions of the authorities, but also on numerous factors beyond their control.

The stagnation in the economy for the past two consecutive years has created the preconditions for the resumption of the previously used monetary financing practice to stimulate the economy. However, the Belarusian government will preserve a tight monetary policy, albeit may stimulate some economic sectors.

Similar articles

Former civil servants as new factor in unemployment growth
October 02, 2017 12:27

According to Belstat, in August 7,600 people were dismissed, including 4,800 civil servants. Dismissals of civil servants were due to the optimisation in the public administration by up to 30%. Some civil servants would retain their job however would lose the status of a civil servant. Vacancies on the labour market are likely to reduce in number, thanks to the optimisation, the state administration would increase wages for public servants. The payroll fund for retained employees is likely to increase and some former state employees are likely to get jobs in affiliated organizations. The optimisation of the state apparatus should complete by January 1st, 2018, and some former civil servants are likely to join the ranks of the unemployed.

Recent trends

cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china cheap nba jerseys from china wholesale nba jerseys from china discount nba jerseys from china