Government’s adjustments to 2014 forecast may not be approved
On October 22nd socio -economic development forecast for 2014 was published.
International trade situation has led up to adjustments in the 2014 Belarus’ development forecast plan. Major indicators have been substantially lowered. However the president is unlikely to approve this realistic forecast and may order to set more ambitious goals for 2014. This would recreate the 2013 situation, when GDP growth forecast will not have been implemented.
Initially, the socio-economic development plan for 2014 assumed GDP growth at 5.7%. Inflation was projected at 11%. It was projected that the external demand for Belarusian goods would trigger economic growth up to 3.6% of GDP growth. However, due to changes in potash fertilizers exports and in supply of crude oil volumes, external economic factors needed to be readjusted. The latest version of the socio-economic development plan for 2014 assumes export of potash fertilizers at 5 million tons, against 7 million tons planned initially. Estimated volumes of oil supplies to Belarus were also adjusted downward.
Also, the most recent version assumes only 2.4 % GDP growth and higher inflation rate – 14.5 %. The average USD/BYR exchange rate has been revised upward to about BYR 9800 per USD. Growth of exports of goods and services has been decreased to 7.2 % (11.7% in 2013). Population’s real wage growth has been reduced from 6.0% to 4.0 % in 2014.
The latest version of the socio-economic development forecast for 2014 is feasible, but will not be approved. 2014 is the pre-election year, which means the country’s leaders need to demonstrate success of the Belarusian managerial and economic models against the background of the world crisis and the crisis in other countries. The updated plan is not ambitious and does not require pushing off the limits. However the president will almost certainly demand to readjust parameters upwards. The weak diversification of exports and the limited range of export goods, including distorted macroeconomic indicators restrict the economic growth at 1-2%. If indicators are adjusted upward, the economy will unbalance and a situation similar to 2011 might occur.
The Belarusian economy has a small chance not to be hit by the devaluation, which requires the political will to recognize the incapability of the economy to significant progress. The authorities have consistently denied the failures of the Belarus’ economic model, which may result in a new devaluation loop.
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.