Industry lost its growth source
In May, for the first time since early 2013, stocks declined (by BYR 897. 9 billion).
In 2013 growing stocks enabled industries to demonstrate industrial production growth. In May, measures implemented to reduce stocks’ volumes, resulted in a sharp decline in industrial production. Reduced stocks will help enterprises to improve their financial performance, however orders to increase production output to ensure projected GDP growth rate might be issued again.
Over the past five months in 2013, only in January the industry was able to increase the industrial production volume. High standards set in 2012 were mainly due to the production of solvents and lubricants. To achieve the desired growth, industries have increased stocks dramatically, regardless of the obvious deterioration in the external economic situation. In Q1 2013 stocks grew by BYR 11.2 billion, or 5.4% of the total production during the period. If stocks had not increased, industrial production index could be below 95%, thereby clearly indicating problems in the industry. Growing stocks enabled to assess the situation as “minor problems of seasonal nature”.
Simultaneously, growing stocks provoked sharp criticism by the authorities, which demanded to reduce stocks substantially by autumn. In May stocks were reduced by BYR 897.9 billion. Food industry played the major role. Stocks reduction in machinery and equipment manufacturing is questionable, because goods could have been sent to warehouses in Russia. In May industrial production reduced by 10.5% compared with May 2012, which in turn resulted in slower GDP growth – from 2.5% in January-April to 1.1% January - May.
Reduced stocks improve enterprises’ financial performance. They spend less on warehouse rental space, improve payments balance, and reduce production of non-liquid products. Some companies started monitoring market conditions and adjusting their production plans accordingly. However, soon the authorities might start interfering with enterprises economic activities again and demand to increase the production volumes, since industry generates 27% of GDP, affects the wholesale trade, which accounts for circa 9-9.5% of GDP, and other activities and taxation. GDP growth plans will not be performed, but the government needs to show at least a minimal increase in GDP, because GDP was growing over the last 10 years.
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.