Belarusian government aims to achieve economic growth without monetary financing
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.
The Belarusian authorities have revived the cyclical political agenda, including preventive crackdown with the use of force during the Freedom Day rally in Minsk and a loyal attitude to the participants in the opposition events in the regions. The protest rally in Minsk has evidenced that the Belarusian society has freed from the post-Maidan syndrome and showed high self-organisation capacity during the event in the absence of opposition leaders. In the future, the authorities are likely to expand the framework for sanctioned and legal activity for the moderate opposition in order to reduce the potential for street protests.
The Freedom Day march in Minsk on March 25th, 2017 was marked by unprecedented and brutal detentions before and during the event.
The Belarusian leadership has managed to stretch in time the political cycle - liberalization followed by repressions - and move beyond the electoral campaigns. Simultaneously, Minsk has demonstrated a rather high mobilisation potential under political slogans, despite the pressure from the state media and security forces before and during Freedom Day, including the presence of armed officers and new special equipment to disperse demonstrations in the streets of Minsk. That said, in other towns (Vitebsk, Gomel, Brest and Grodno) the Freedom Day march led by the opposition, was sanctioned by the local authorities (except Vitebsk), albeit there were fewer participants than in February and March protests against the decree on social dependants.
The Belarusian leadership has depersonalised (removed leaders) the protest, preventively weakened the protest movement, and has not opted for the harsh crackdown like in 2010 with many injured and hundreds arrested. For instance, some party leaders were preventively arrested or detained (Lebedko, Rymashevsky, Gubarevich, Neklyaev, Logvinets, Severinets) before the event. Nikolai Statkevich has disappeared and his whereabouts are currently unknown. Some could not pass through the police cordons (Yanukevich and Kostusev) or participated in the rallies in the regions (Dmitriev, Korotkevich and Milinkevich).
Despite the lack of protest leaders, some demonstrators managed to self-organize and march down the Minsk centre. The march was unauthorised but gathered several thousand participants. Many were detained by the law enforcement and later released without charges. In addition, the Belarusian law enforcers used some tactics of the western riot police against peaceful protesters, allegedly in order to mitigate the criticism from Western capitals.
Nevertheless, the Belarusian authorities have used the entire set of propaganda and power mechanisms applied during the highly politicised 2006 and 2010 elections - criminal prosecution of the opposition leaders, preventive detentions and arrests of activists, harsh propaganda campaign in the state media and, finally, the crackdown on the protest action in Minsk with the use of force.
Overall, the mobilisation potential of the Belarusian society remains high and the authorities are likely to expand the legal framework for public participation in politics in order to absorb superfluous tension.