Recession registered in Belarus
On May 15th Belstat published data on Belarus’ socio-economic development in January-April 2013.
Despite the positive nominal GDP growth rate, in April 2013 GDP level was below April 2012. All methodological and administrative practices of GDP growth inflation have been exhausted. Artificial pumping of GDP by the construction intensification and investment in fixed assets may show some success until mid Q3, and only if the external economic situation in the Russian market is stabilized.
In January-April 2013, GDP growth rate was 2.5%. In Q1 (January-March) 2013, GDP growth was 3.5%. In fact, in April the three-month GDP growth reduced by one percentage point, suggesting that GDP decline in April 2013 to April 2012 was 0.5-0.6%. Negative GDP growth was recorded in Q4 2012 - 1.5% over the same period in 2011. GDP growth in Q1 2013, was mostly artificial and short-lived. April data recorded an economic decline, and with adjustments by ‘methodological procedures and administrative measures’ Belarus experiences industrial production decline and about zero GDP growth during six months, which can be characterized as a recession.
Reduced pace of piling stocks (in April 2013, stocks totaled BYR 1 trillion, which is the lowest value in 2013) reinforced the decline in industrial production. In April, two industries that provided for the most increases in stocks of goods - vehicles and machinery production and equipment manufacturing – reduced their production volumes to stop further increases in the volume of non-liquid products in warehouses. Retail and wholesale trade growth rates are slowing down. Net taxes on products, one of the main sources of GDP growth in Q1, in spite of all attempts to increase with growth in industrial subsidies, can no longer increase by a significant amount due to the overall economic situation.
Q2 2013 showed negative economic trend, primarily due to the extremely high comparison base in 2012. The government links some hopes with the construction sector, which is expected to be ‘heated up’ by a Decree on public procurement for the housing construction needs. However, the results will not come soon, because it takes time to reconfigure the entire housing construction system in the country and to harmonize the legislation. However, housing construction will not be able to improve the overall economic situation in Belarus if there are no improvements on the Russo-Belarusian foreign trade market. Without an increase in engineering exports to the Russian market, the domestic demand and exports to other countries will not ensure the industry’s growth in the economy, and hence GDP.
Thus, Belarus is directly affected by the negative global trends and slowed down economies. Attempts to heat the Belarusian economy artificially will still be made and the consequences will depend on their scale. Excessive efforts will inevitably bring back the issue of devaluation on the Belarus’ economic agenda.
The country's leadership has instructed the local authorities to raise minimum wages at enterprises by the end of 2019 to BYN 1,000, which would lead to an increase in the average wage in the economy as a whole to BYN 1 500. The pace of wage growth in 2017 is insufficient to ensure payroll at BYN 1000 by late 2017 without manipulating statistical indicators. In order to fulfil the president’s order, the government would have to increase budgetary expenditures on wages in healthcare and education, enterprises – to carry out further layoffs and expand the practice of taking loans to pay wages and restrict investment in modernisation of fixed assets. In 2010, the artificial increase in wages led to a threefold devaluation in 2011, an increase in the average salary to BYN 1500 will not match the capabilities of the economy and would lead to yet another devaluation.