Wage growth provokes economic crisis in Belarus

April 22, 2016 18:33

The Statistics Committee reported that the average monthly wage in May 2013 was BYR 4,988 million (USD 575).

In Belarus, wages continue growing despite the deteriorating economic situation. One of the main causes of 2011 crisis was a sharp rise in wages in late 2010. Belarusian leadership repeats all its previous mistakes and does not recognize the systemic problems inherent in the Belarus’ economic model.

Nominal wages in May were BYR 4 988.3 million or USD 575, which is 4% higher than in December 2012, and 32% higher than in May 2012. Labor productivity in Q1 2013 increased by 3.5% over the same period in 2012, and preliminary data shows that by June it will be 2%. The situation with one of the main macroeconomic ratios is deteriorating. Labour productivity is growing slower than wages increase as a result expenses grow faster than revenues, which deteriorates enterprises’ financial performance.

In 2013 the situation is similar to pre-devaluation period in 2011. In 2009-2010 wages increased sharply, the current account payments balance deteriorated, and there was no substantial foreign funding to cover the current account balance deficit were lacking. In 2013, the current account is negative, the international trade balance in services can not compensate for the negative foreign trade balance in goods, additional guaranteed external incomes are not feasible and the domestic foreign exchange market situation is closer to net foreign currency demand from legal and private persons. All this is largely due to the increase in wages, which increased consumer imports and created an additional demand for foreign currency for the saving purposes.

Current economic situation is as follows. The economic situation is deteriorating, while the government is focused on the implementation of quantitative indicators. Enterprises’ financial condition is poor - accounts payable and accounts receivable increase, net incomes reduce, and international economic situation for most businesses is deteriorating. Against this background, wages’ growth, altogether with administrative orders to maintain a relatively stable staffing policy create an additional negative factor that will result in pumping the economy with print money, followed by pressure on the foreign exchange market, reduced gold reserves and the need to depreciate the national currency to avoid economic collapse.

A systemic problem is that the solution to the current situation is bound to a narrow circle of decision-makers, private initiative’s suppression and extremely unfavorable investment climate for investors who unable to use administrative resource to set up a new enterprise. These problems were there for many years and were never solved, putting Belarus in a vicious circle of economic cycle “from devaluation to devaluation”.

Thus, Belarus is moving along the path that resulted in devaluation in 2011. Belarus fails to analyze its previous experiences and ignores constructive criticism; ergo it is bound to repeat its own mistakes. The probability is high that in the coming 1.5-2 years devaluation will be repeated.

Similar articles

Death penalty discussion in Belarus: yet not ready for either abolition or moratorium
September 18, 2017 10:43
Фота носіць ілюстрацыйны характар. Источник: https://dobromirole.blogspot.com.by Читать далее: http://www.b-g.by/society/4-chamu-pra-smyarotnae-pakaranne-belarus-paslya-razmovyi-bresce-z-alesem-byalyack-m/

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.