Measures to support industry will not save Belarusian economy from further fall
In January – October 2015, GDP fell by 3.9%. The authorities’ measures undertaken in October in order to preserve employment have somewhat offset the decline in production at major Belarusian industries. . The government is unlikely to switch on the money printing due to the ongoing talks with the IMF over a new loan.
According to the National Statistics Committee, in January – October 2015, Belarus’ GDP fell by 3.9% compared with the same period in 2014. In January – September GDP fell by 3.7%. Indices have fallen in all economic activities except retail trade. Investments in fixed assets decreased by 14.1%, the drought has led to a decrease in the agricultural production by 3.9%, freight transportation has decreased by 3%, industrial production has decreased by 7.1% and stocks in October have increased by BYR 673 billion.
In October, in order to reduce social tension in the view of the Presidential campaign, the authorities undertook measures to encourage artificial employment at various industrial enterprises. As a result, rubber industry has increased production, and mechanic and electrical engineering have improved performance. This has somewhat allowed to offset reduced production in food and chemical industries, and refining.
The authorities’ measures were only temporary. Budgetary constraints would not allow carrying on with such measures and enterprises would have to carry out mass layoffs in order to improve their financial health and performance. This would further reduce people’s incomes and retail trade turnover.
In Q4 2015, the production of potash decreased due to repair works, consequently leading to reduced indices in wholesale and transport. The main volume of agricultural works has been completed, meaning that agricultural indices will not change significantly. The Russian economy has shrunk by 3.7% since early 2015 without any positive outlook, which means that Belarus would be unable to increase her exports on the Russian market. Amid talks with the IMF, the Belarusian authorities would refrain from further measures to stimulate the economy through money printing and the industry would continue its fall. For the first time in the past 15 years, GDP may shrink by 4.1-4.3% by the year-end.
The government’s measures have only slightly slowed down recession in Belarus. Since it is impossible to achieve GDP growth in 2015 anyway, the government will not switch on the money printing press to stimulate the economy.
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.