Financial performance of Belarusian economy leaves no hope for economic growth to resume

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May 26, 2016 12:35

Writing off currency exchange rate differences in March 2016 has not helped to improve the financial health of the economy. The main reason behind Belarus’ economic losses was faster growth of production costs in comparison with the growth of rouble revenues. The lack of funds does not allow companies to produce new products and promote them on foreign markets, which is why export performance is unlikely to improve in 2016 and economy is unlikely to recover.

According to the National Statistics Committee, in Q1 2016 the Belarusian economy performed with a BYR 1.2 billion loss. A year before, the Belarusian economy’s profit was BYR 11 trillion. In March 2016, the government enabled writing off currency exchange differences, which has reduced the losses by BYR 20-25 billion. More than one third of Belarusian companies are unprofitable, and 70% of those profitable have less than 10% in return on sales. Currently, the following industries are unprofitable: oil extraction, metallurgy, cement and rubber products, electric power, mechanical engineering, hotel business and catering.

The economy is at a loss due to enterprises’ financial and investment activity. In order to modernise their production capacities enterprises have used foreign currency loans, but due to the national currency devaluation, the servicing costs of the loans have increased substantially. Enterprises purchased fuel and raw materials outside the country using foreign currency and deterred payments, which had led to an overestimation of the amount payable for the received raw materials. As a result, production costs grew at a faster pace than revenues, which led to losses in the economy.

Amid economic losses, economic growth is impossible. The enterprises have no funds to modernise production capacities. Without new equipment, they cannot produce new products and demand for old products is consistently reducing. The lack of funds does not allow enterprises to study modern trends in their product niches and promote their products on foreign markets. In Q1 2016, exports of goods decreased by 20%, and trade deficit totalled USD 825 million.

In the given circumstances, only some economic sectors will demonstrate a positive trend in sales on foreign markets. The state will not stimulate domestic demand due to a plan to reduce budget spending by 7-8% in 2016. The National Bank, in turn, for the sake of stability on the currency market will constrain the money supply and soft loans to the economy. The decline in industrial production is inevitable, wage growth will be minimal and will not exceed the inflation rate. Construction is not the economic driver any longer and the share of other types of economic activity, even in the case of their growth, is not enough to overcome the overall economic downturn in 2016.

Even after writing-off losses from currency exchange rate differences at BYR 20 trillion, the Belarusian economy in Q1 2016 is at a loss. Amid the lack of funds at enterprises and restrictions on lending by the National Bank, the Belarusian economic recovery is impossible.

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Belarusian and Ukrainian Defence Ministries entangle in confrontation spiral
October 02, 2017 11:57
Фото: RFRM

Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.

The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.

Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.

For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.

Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.

The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.

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