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Economy: The lingering recession

January 03, 2017 11:56

Amid fewer benefits from economic cooperation with Russia, the main trend in 2016 was a large-scale revision of the financial support to different economic sectors due to insufficient budget revenues.

Due to the decline in social transfers (the share of state subsidies for housing and utility services reduced from 51.5% to 40% by late 2016), reduced soft loans for housing construction and slow wage growth, the population in 2016 started spending their currency savings.

The population became a major currency donor by selling USD 1.8 billion on a net basis.

Thanks to this, two tranches from the EEU and sales of currency bonds, the National Bank and the Finance Ministry made due internal and public debt payments in full.

By reducing administrative lending, Belarus stabilised the national currency, however, in the absence of cheap corporate loans, the volume of overdue debs on corporate loans increased dramatically - the share of problem assets in banks’ balance sheets increased from 6.8% to 14.9%, creating the preconditions for a crisis in the banking system. In order to address the problem with debts in agriculture, the government established the Asset Management Agency, aimed to clear the banks' balance sheets from bad loans of agricultural organisations. Consistently insolvent enterprises will be closed through the court.

Amid deteriorating price situation on foreign markets for Belarusian goods, the oil and gas dispute between Belarus and Russia had an additional negative impact on the economy. Russia unilaterally cut the monthly supply of oil from 2 million tons to 1.03 million tons, which resulted in reduced oil processing, industrial slowdown and decreased wholesale trade by 10%.

The economic result of the year was the abandonment of quantitative performance indicators, the decision on the financial restructuring of agriculture, and the shift of financial consequences of the economic crisis onto the population by reducing social payments and benefits.

In 2017, the government’s main task would be to hold a financial audit at public enterprises with subsequent layoffs, to adopt measures preventing the banking crisis and to search for new and additional sources of financing to service the public debt. Amid further cuts in financial aid from Russia, some social and economic reforms could be held in Belarus.

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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.