Belarus"s economy in 2013: Forward to the Past
On February 21st forecast data about socio-economic development in 2013 was published.
The 2013 projected data demonstrates the return of the economy to the 2010-2011 standards. The economic model will not change – the government is only choosing sources of funding to support the status quo. The period until the next devaluation will last as long as the government is able to find the required amount to keep the situation as is.
The Economy Ministry Regulation No 1, dated January 4th, 2013 and published only in the second half of February states, that the Belarus’ current account balance in 2013 is projected with deficit minus USD 5.123 billion. In 2010, the balance was negative – minus USD 8.28 billion, in 2011 – minus USD 5.121 billion. In 2013 Belarus will benefit from gas supplies at discount prices – USD 2 billion, if compared with 2011. Excluding the possible continuation of the potential diesel fuel imports for the biodiesel production and potential benefits from the agreement on the duties’ distribution, the picture resembles that of 2010.
The improvements in 2012 were temporary and mainly due to additional financial benefits from Russian oil re-export schemes. Scheme’s suspension has triggered a chain reaction in the economy, which resulted in a drop in industrial production. The foreign trade balance was therefore negative and the financial economic outputs had deteriorated. Distorted perception of the real situation in the economy was due to savings of USD 2000 million to pay for the natural gas supply. The economic recovery was a misconception and some mistakes were repeated, which resulted in the devaluation in 2011.
Devaluation effect ceased to have impact in the second half of 2012. Wage growth has exceeded the nominal value compared with December 2010. The sale of Beltransgaz and oil re-export schemes increased the gold reserves to a relatively safe level (2 months worth of imports of goods and services). However, there were no significant structural changes. The main exports are petroleum products; Belarus’ dependence on its main market - the Russian Federation, has increased; privatization efforts have been halted, the modernization de facto looks like the distribution of funds with minimal economic impact; private business operate primarily to maximize their profits due to potential sudden change in the business conditions, including the assets’ nationalization.
Thus, the economic cycle in Belarus has looped. The period until the next devaluation will last as long as the government is able to find the required amount to keep the situation as is. The government considers sales of certain assets as a last resort option. The economic model will not change – the government is only choosing sources of funding to support the status quo.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.