Potash fertilizers hinder GDP growth in Belarus
On September 19th, the National Statistics Committee published Belarus’ major socio-economic indicators in January - August 2013.
Data from August 2013 shows the Belarusian economic situation compared with 2012. The potential industrial performance growth was offset by a significant drop in the production of potash fertilizers. The government will have to adjust the 2014 plans downwards, since there are no apparent drivers for economic growth.
In August 2013, a period of high comparative base in the petro-chemical industry came to an end. The last tank of solvents was sold on August 4th, 2012, which allowed ‘clean’ performance indicators to be gathered for one of the leading industries (which excluded the effects of solvents on the industrial production index). The ‘cleanest’ data will be reported in October 2013 (biodiesel exports were suspended in September 2012). It was anticipated that August 2013 data should show GDP growth, enabling the government to talk about overcoming the economic crisis in Belarus.
However, economic performance results in January – August 2013 were worse than anticipated. GDP growth slowed from 1.4% in January – August 2012, to 1.1 % in 2013, which implies that GDP in August 2013 is below GDP in August 2012. The main reason is the negative situation with potash production, which slowed by almost 40% having a negative impact on Belarus’ economy. The industrial production index in January – August was 95.2%, and August 2013 to August 2012 – 93.1%. The positive dynamics in the food and cement industries were unable to rectify the situation in the industry as a whole. Negative trends strengthened in the mechanical engineering and metallurgy.
The negative trends not only put an end to the initial GDP forecasts for 2013 (6-8%), but also to the readjusted version (4.6 %). The government’s forecast was unachievable and the economic growth reserves were significantly overestimated. The forecast for 2014 has to be calculated more realistically in order not to distort the macroeconomic parameters. Unfortunately, such an obvious and rational solution is not understood by the country’s top managers.
As a result, the Belarusian economy is highly dependent on a few key industries, which increases the risk of negative developments in the economy as whole. The government should take a very careful approach when projecting forecast parameters for the budget and socio-economic development, because the economy has very little growth capacity in the coming years.
According to Belstat, in August 7,600 people were dismissed, including 4,800 civil servants. Dismissals of civil servants were due to the optimisation in the public administration by up to 30%. Some civil servants would retain their job however would lose the status of a civil servant. Vacancies on the labour market are likely to reduce in number, thanks to the optimisation, the state administration would increase wages for public servants. The payroll fund for retained employees is likely to increase and some former state employees are likely to get jobs in affiliated organizations. The optimisation of the state apparatus should complete by January 1st, 2018, and some former civil servants are likely to join the ranks of the unemployed.