Economic recession in Belarus will be treated with changes in statistical methodology
The National Statistical Committee has adopted a new methodology to measure non-observed economy. These changes were prompted by the need to have better understanding how non-observed economy affected the overall economic performance in Belarus. As a result, GDP is unlikely to start growing, however some statistical indices may improve.
The new regulation regarding non-observed economy measurements will take effect in late June 2015. The core changes in the methodology imply inclusion of a greater number of activities when calculating GDP. In particular, the volume of housing services for personal consumption has been increased. If a company does not provide statistical reports, then it will be assumed that its workers produce equal volume of products with those companies, which engage in similar activity and report to the Statistics Committee. Private entrepreneurs will report like small enterprises with up to five people. Tutoring services will be measured based on number of those admitted to full-time studies at universities.
Such changes have been introduced in order to have better understanding how non-observed economy affects the overall economic performance in the country. Errors and omissions in the Belarusian balance of payments previously often were explained by the exclusion of non-observed economy from statistical measurements. Several state agencies will be in charge of implementing the new regulation.
In Q1 2015, the Belarusian economy fell by 2.6% without any prospects for improvement. Industry was the main culprit of falling GDP. Meanwhile, amid crisis and mass layoffs, non-observed economy has grown. Non-observed economy’s production output would be difficult to compare with the production output at larger enterprises and in most cases would be significantly lower. Expert evaluation, which will be used in the updated methodology would be difficult to verify, which might lead to overreporting. Some entrepreneurs will cease operations, but will be included in GDP measurements.
Overall, the Belarusian Statistical Committee has acknowledged problems with traditional economy reporting. It seeks to improve reporting by including non-observed economy indicators. Eventually, these new adjustments in the methodology are unlikely to show significant impact of non-observed economy on the economy in general, however, they might demonstrate economic growth by about 1% before the presidential elections in October 2015.
President Lukashenka has met with the head of Chechnya Ramzan Kadyrov, who visited Minsk and the Minsk Automobile Plant. Minsk has always sought to have independent links with Russian regional elites, partially, to compensate for the Kremlin's diminishing interest in Belarus. In recent years, Belarus’ contacts with the Russian regions have been extremely intense. However, with some leaders of Russian regions, primarily heads of large republics, communication was more difficult to build. As many analysts in Minsk suggested, Minsk could regard contacts between President Lukashenka and the head of Chechnya as an additional communication channel for relieving tension in relations with the Kremlin. However, most likely, a trusting relationship with Kadyrov is a value for Minsk as such, provided Kadyrov’s broad business and political interests, and a high degree of autonomy for the Chechen leader from the Kremlin.