Fighting inflation: Belarusian style

April 22, 2016 18:26

On March 1st, 2013 Lukashenko talked about the need to curb inflation and strengthen the administrative regulation.

The government forecast for 2013 is that inflation will not exceed 12%, which is anticipated to be achieved by administrative means. Early 2013 performance results cast doubt about their ability to fulfill this task. Economically opposing indicators, such as production growth and wages growth on the one hand, and inflation on the other, can be achieved as projected, but it will entail deterioration in the enterprises’ financial situation.

The socio-economic development forecast for 2013 envisages the consumer price index in December 2013 at 112% of December 2012. To this end, the government has developed a matrix phased price increase to achieve the desired performance. Using the National Statistics data about the share of any product in the consumer price index, quantitative impact of the final price on inflation can be calculated. Product manufacturers will be informed when, and to what extent they can increase prices.

In January 2013, the CPI was 103%, which is 25% of the total price increase for the year. In February, in 12 days the CPI was 100.4% of the average prices in February. The National Statistical Committee, starting mid-February, stopped providing formal data on the decadal prices’ growth rates. The CPI calculation methodology has certain shortcomings, which exclude changes in the structure of consumption of goods by the population during the year. Data on consumer prices in 2012 were calculated based on the structure of household consumption in 2011, which, given the large differences in income results in a distortion of the actual CPI.

As a rule, orders about price increases are practiced in state owned enterprises, but officials announced they will actively interfere with the pricing policy at private enterprises. At the same time, companies are ordered about the desired quantitative output growth and wages growth. These figures are detached from the current market situation, and a number of enterprises, especially in the public sector, have to meet high output growth indicators, while market conditions require a reduction in the output due to overproduction and increased losses.

As a result, industrial enterprises are in a kind of economic trap. Wage growth leads to increased costs and reduced competitiveness in foreign markets. The increase in production (regardless of the situation in the markets and, above all, international) results in deteriorated financial situation. To offset losses from lower prices in foreign markets prices in the domestic market would have to increase, but they are restricted by the matrix indices for price growth, ordered by the government.

Thus, the price growth can be restricted administratively, but the financial situation of the enterprises will suffer, and the government is less concerned about that that about meeting the projected GDP and production growth forecast. In the end, enterprises will be to blame for this, not officials.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.