Government seeks who to blame for the failure to meet GDP growth forecast
On June 14th, the government met to discuss socio-economic development performance in January-April 2013.
GDP growth pace in January-May 2013 slowed down to 101.1%, implying there are no chances to meet the GDP growth forecast for 2013. The negative economic situation forces government to consider who to blame for the economic failure. Under these circumstances, the probability of making controversial decisions which cannot improve the situation in the economy and make it worse, is increasing.
According to the National Statistics Committee, in January-May, GDP growth slowed down to 101.1% from 102.5% in January-April 2013. Industry is the main source of troubles in the Belarusian economy. In January – May 2013 production dropped by 3.5%. In May, the overall negative economic trends were complemented by a dramatic deterioration in the economic situation at Belaruskali – industry’s main driver in 2013. Belarus’ exports situation is not improving. As a result, the GDP growth forecast for 2013 will not be implemented.
Since the forecast will not be implemented, the government starts looking for a scapegoat. Industry explains the drop in production by external factors and expensive loans, the National Bank cannot lower the discount rate rapidly due to the potential increased demand for the national currency, which is undesirable because of the economy’s limited crediting opportunities. The Economy Ministry complains about poor diversification of Belarusian exports and proposes to set export plans using natural indicators. Instead of improving coordination among all ministries and agencies, the government starts looking who to blame for the economic failures by the year-end.
The situation affects coherence of managerial decision making. To unload warehouses, enterprises require greater independence to adjust their industrial production to meet the demand in different markets. The government ignores enterprises’ needs and requests them to reduce production stocks while increasing production. The National Bank is under pressure to lower loans’ interest rates, but that will increase the risks for the foreign exchange market and will reduce the growth rate for individual and business deposits. As a result, inflation will increase and gold reserves will drop. Simultaneously, everyone understands the importance of maintaining the international reserves at a certain level and is bound by the need to curb inflation.
The best option would be to abandon the GDP growth plan in favour of the balanced economic development. However, the president demands the forecast’s fulfillment, which may increase the negative trends in the economy.
Thus, the government is not focusing on mitigating the negative trends in the economy following downward trends in the foreign markets, but seeks who to blame and punish for the inevitable economic failures. Such attitudes strengthen crisis trends that may result in devaluation, as in 2009 and 2011.
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.