Consumer lending is unlikely to improve until incomes start growing
According to the National Bank, as of January 1st, 2017, consumer debt of Belarusians totalled BYN 1.7 billion and increased by BYN 59 million over the year. Provided the average interest rate on consumer loans in 2016 at 24.4% per annum, interest payments on loans could exceed BYN 400 million. People preferred to repay old loans rather than taking new ones. Financial health of banks mainly working with consumer lending is likely to deteriorate, layoffs in the banking system are likely to persist, and interest rates on loans are likely to decrease, while banks will preserve tough requirements for borrowers to prevent growth in bad loans. Unless people’s wages start growing, they are likely to constrain consumer spending, and in order to boost sales, enterprises are likely to use instalment schemes and calculate some costs as own costs.
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.