Belarusian government may fulfil GDP growth forecast at 1.7% in 2017
The industry became the main driver of the Belarusian economy in 2017 and made the main contribution to GDP growth at 1.6% in January - August. Belarus’ socio-economic development forecast for 2017 based on a low price for oil, growth was expected due to new economic sectors. A higher oil price has led to an increase in Belarusian exports, while the implementation of oil agreements in the case the oil price retains or goes up would ensure GDP growth at 1.7% in 2017.
According to Belstat, in January-August 2017, Belarus' GDP grew by 1.6% compared to the same period in 2016. The main growth was ensured by the industry, the added value of which increased by more than 5%. Earlier harvesting season as compared with 2016, has demonstrated growth in agriculture; reduced subsidies to the economy enabled to increase the indicator of net taxes on products. Construction was the only major economic sector which performed worse than in 2016.
In 2017, the Belarusian government drafted two socio-economic development forecasts. The first assumed low oil prices – at USD 35 per barrel, which should have deterred industry performance. At this oil price, economic growth was projected at 0.2%. The ‘optimistic’ scenario envisaged economic growth at 1.7%, mainly due to the new economic sectors.
Currently, the price of oil is higher than the forecast. In January – July 2017, the average price for Russian URALS oil totalled USD 50 per barrel, which boosted economic growth in Russia and led to an increase in Belarusian exports by 24% in January – July 2017. Thanks to an increase in production, Belarusian enterprises were able to raise wages, which let to growth in retail trade turnover by 1.9% in January – August 2017. Simultaneously, Russian industry growth rate has slowed down, which could lead to a production slowdown in Belarus.
In the given circumstances, one of the key factors which would help fulfilling the ‘optimistic’ forecast for economic growth in 2017, would be oil supply agreements. Belarusian refineries are unlikely to process all envisaged 24 million tons of oil in 2017 due to the limited capacity and a cut in supplies in Q1 2017. Should Belarus receive all oil as planned, she is likely to resell circa 6 million tons of Russian oil and keep the oil export duty. This would improve the wholesale trade. Belarusian refineries would process 18 million tons of oil in 2017, which would be the same volume as in 2016.
Additional budget revenues could be spent on pay rises in the social sphere and would lead to an improvement in retail trade. Altogether, these factors would ensure GDP growth in 2017 at 1.7%, even if the Russian economy somewhat slows down.
Overall, high oil price has been the key factor which ensured the economic recovery in Belarus. Russia's compliance with the oil supply agreements in 2017 at 24 million tons would guarantee additional budget revenues and ensure implementation of GDP growth forecast at 1.7%.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.