Government chooses between stagnation and devaluation
On October 19, 2012, an extended participation session of the National Bank Board took place
The deteriorating situation with foreign trade and growing pressure on the foreign exchange market, are forcing the National Bank to resort to rigorous monetary policy . However, such a policy makes it impossible to fulfill plans for a 5-percent GDP growth n 2012.
Termination of exports of dissolvents and dilutants resulted in a deteriorating situation with foreign trade. Another negative factor is a decline in potash fertilizer export; export sales of potassium chloride are highly unlikely to improve by the end of the year. Due to the fact that Russia will join the WTO, several Belarusian export positions will have to compete with foreign suppliers.
In such a situation, the National Bank has to resort to rigorous monetary policy which has been significantly relaxed in recent months. Active economy lending, wage rises as well as a decrease in loan rates created an illusion that the economic situation had stabilized.
The last two months have demonstrated a noticeable deceleration in industry due to slower growth in production of chemical and petroleum products.
Due to the current situation with the export of potash, potash fertilizers as well as dissolvents and dilutants, growth rates will not recover and will continue to decline. As a result, the industry growth rate of GDP is slowing down, which correspondingly affects growth of wholesale trade. Retail sales and investments into fixed assets could compensate for the reduction in GDP growth by industry.
Rates growth in the interbank market is caused by a number of reasons. A lack of liquidity in the market, limited support of the National Bank, stricter requirements to the mandatory cash reserves resulted in growth of loan rates in the interbank lending market. Under such circumstances, it is inevitable that debt financing of the economy will reduce, and consequently lead to a decline in investment into fixed assets. Most likely, the companies will be forced to resort to the policy of wage restraint due to the worsening economic situation, which will result in the reduction of turnover growth. Therefore, it could be concluded that government not only has no tools to increase GDP growth rate, but also to maintain the GDP at the level of 2.5% In this situation, government has to admit that they failed to fulfill their obligations to provide for GDP growth rate of 5% in 2012.
The Belarusian authorities could to step up the opposition representation in local councils, should party members demonstrate potency. The Belarusian leadership is unlikely to have the resources to ensure 100 percent pro-government candidates in the local elections. The authorities have exhausted the grassroot support and have no funds to pay for the loyalty.
The Belarusian Central Election Commission has proposed to hold the elections to the local Councils of Deputies on February 18th, 2018.
The president has repeatedly emphasised the importance of the local councils in the power system and the state machine always tried to ensure the necessary local election results. Candidates have been decreasing in number with each elections and the authorities dealt with that by reducing the deputy corps. That said, during the rule of President Lukashenka, his electoral base has changed substantially. Over the past decade, most Belarusians have moved to cities and lost their local roots. The rural population is ready to support the president, but rural residents are constantly decreasing in number.
The Belarusian leadership is likely to permit broad participation in the election campaign and an increase in alternative representatives in the local councils. However, the opposition would have to boost its activity, so as so far it has been passive in defending its interests. In addition, the authorities, while determining the date for the local elections, have taken into account the fact that the opposition is usually the least active in the winter time.
Overall, both, the opposition and the local authorities have exhausted their grassroot support, however new local leaders may still come on political stage, although the party opposition has not yet shown sufficient aspirations.