header -->

Economic forecast for 2018 as indicator of limits for existing economic model

Category status:
July 04, 2017 11:37

The conservative economic forecast for 2018 assumes GDP growth at 1.1%. Until 2017, the economic growth forecast was overestimated, which prompted periodic revisions and by the year-end the projected economic results were never achieved. Without economic reforms, Belarus’ GDP growth would depend on external factors, the government, however, is not ready to start reforming the economy and liberating business initiative.

The Belarusian government has prepared two scenarios of economic forecast for 2018. The state budget would be drafted based on the conservative scenario. It envisages the oil price at USD 40 per barrel, the Russian rouble exchange rate at RUB 70 per USD 1, Russia's GDP growth at 1.5% maximum and Belarus’ GDP growth at 1.1%. The second scenario envisages changes in approaches to state property management, liberalisation of the business environment for SMEs, and a reduction in the tax burden on business. An additional factor which could stimulate entrepreneurial activity would be the legislation on the irreversibility of privatization, and amendments to the Criminal Code decriminalising some economic activity.

For the first time, two scenarios of economic forecast, including the conservative one as a base for the draft state budget were prepared for 2017. In previous years, socio-economic development forecast had overestimated indicators, requiring monthly budgetary adjustments. Such approach resulted in several devaluations between 2009 and 2016, economic contraction and an increase in foreign borrowings to preserve the existing economic model.

The conservative forecast for 2018 indicates that the government understands that there is a need to reform the economy. Current economic growth at 0.9% in January – May 2017 was only possible due to the low comparative base of 2016, after a reduction in GDP for two consecutive years. The Belarusian government has no influence over most factors, which contributed to the economic recovery in 2017 (eg the growth in exports to Russia, higher oil price, resumption of potash exports). Unreformed, the Belarusian economy is limited by the Russian economy’s growth. That said, the only option to boost GDP growth by more than 2% a year is to develop the SME sector, lift restrictions on the entrepreneurial initiative and reduce the state's share in the economy. These measures could give momentum to the economic development, however the state is not ready to give up control over the economy.

The Belarusian economy has exhausted its growth potential. Without economic reforms, Belarus’ GDP would continue to depend on external factors, over which the economic authorities have no influence.

Similar articles

Minsk attempts to make up for image losses from military exercises by opening to Western values
October 02, 2017 11:49
Image: Catholic.by

The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.

Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.

Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.

In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.

Recent trends