Deteriorating foreign trade is the Belarusian economy’s biggest problem

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April 22, 2016 18:21

Foreign trade balance was negative in September. Negotiations about crude oil supply resulted in nothing, which increased uncertainty about oil derivatives exports, the main Belarusian product. Negative outlook on a number of export products may cause problems on the foreign exchange market with the situation deteriorating in 2013.

On November 2nd, 2012 a discussion about Belarusian goods export took place.

On October 30th, 2012 data on merchandise trade in September was published. The balance was minus USD 358 million. The main cause behind the fall was a significant decrease in the export of Belarusian goods against less significant reduction in imports.

So far the Government addressed the problem by increasing physical export volumes to the traditional markets and lowering prices for Belarusian goods. Against this background the abolition of minimum indicative prices for exported beef and pork was a forced measure. Belarusian meat and meat products lost competitiveness in the Russian market. Increased (or even maintained at the same level) export revenues from meat are only possible at lower prices. One of the largest exports among food products will experience increasing pressure from the EU because of Russia’s WTO accession and a number of reduced duties.

The founding of the Export Council, which consisted of a number of significant figures in Belarusian private business was a decorative measure, demonstrating the size of the problem. The Belarusian government has no idea how to address these problems and tries to use decorative formations to demonstrate some activity.

Now the focus is on the negotiations in Moscow about oil supply in 2012 -2013. The lack of result implies that Russia has taken a very tough stance after the solvent-lubricant scam. In October oil supplies were cut down, despite Belarus’ assurances about potential increase in oil supply to reach the previously agreed volumes. Oil deliveries for 2013 have not been agreed yet.

Problems in foreign trade impact the entire economy. The National Bank has to take measures to substantially reduce lending to the real sector. Rates on the interbank market are prohibitive for most businesses. If carried out, privatization will replenish the gold reserves, and will not solve the forex market problem.

Thus, the government is in a difficult situation. Problems with export require short-term solutions, but in some cases, the situation is not dependent on the government, for instance, with potash exports. In other cases, prices need to be reduced, which is challenging due to costly production. If the government undertakes no effort, the situation could deteriorate and foreign exchange market could become imbalanced. However, that is the most probable solution the government will implement – wait and hope for the situation to resolve on its own accord.

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