Restrictions on wage growth will have negative impact on GDP growth

April 22, 2016 18:41

The government plans to limit the average wage in 2014 to USD 625 per month.

In 2013, rapid wage growth contributed to high growth rates in retail turnover. Against the background of reduced production, this helped to maintain positive GDP growth. If wage growth is limited in 2014, retail trade will slow down. The government hopes that greater external demand for Belarusian products will compensate for reduced trade volume in GDP, but these hopes are unfounded.

In January – October 2013, retail turnover grew by 18.2 %. Trade growth was due to wage growth in the economy. Retail turnover growth in January – October 2013 ensured GDP growth by 1.1 percentage points, which in fact, coincides with GDP growth.

In 2014 the projected average wage growth went up to USD 625. In December 2013 the average wage is anticipated at USD 600. This means that the main source for retail turnover growth will be gutted. In addition, in 2014 higher costs of housing and transport services will also limit consumer demand. Consumer price inflation forecast for 2014 is projected at 11%. The higher the inflation rate, the greater the decrease in the index of retail turnover will be. High interest rates on loans in combination with problems with payments and devaluation expectations will result in higher production costs and provoke growth in consumer prices.

In 2014, GDP growth is projected at 3.3%. Taking into account the reduced domestic demand, wholesale and retail turnover will not make a substantial contribution to GDP growth. In its forecasts the government stakes on petroleum products, potash fertilizers, automotive engineering sales growth in foreign markets. However, sales of petroleum products are directly linked to oil imports from Russia, and the supply agreement for 2014 is still missing. Prospects for potash sales are not very promising, especially taking into account lower prices on foreign markets. Sales of trucks in 2013 decreased significantly, and in 2014 sales of MAZ trucks on the Russian market will continue to fall. In fact, Russia has made an ultimatum to merge Belarusian MAZ and Russian KAMAZ.

Thus, high GDP forecast for 2014 is based on inflated expectations for the export of Belarusian goods. If Belarus faces similar problems with its exports as in 2013, retail trade will remedy GDP growth.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.