Warehouse stocks grow as Belarusian economy shrinks
In January – February 2015 grew by 18%. Demand for Belarusian products – primarily on the Russian market – has been declining at a faster pace than production volumes (reduced by 5.8%). Production volumes should be lined up with demand, which means further lay-offs for workers, otherwise economic recession will deepen and yet another devaluation will become necessary.
Since early 2015, stocks in Belarusian warehouses increased by BYR 5.9 billion and reached BYR 38.6 billion. This trend has affected all industries, except for oil refining, with food industry and machine building being the most affected (responsible for up to 50% of the growth). Stocks of some products have exceed the annual production. The situation is the most drastic for freight cars manufacturers – due to a sharp decline in production, their current stocks exceed seven years of the current production volumes.
The stocks situation is closely linked with the sharp deterioration in the Belarusian economy. In January – February 2015, industrial production shrank by 5.8%. Industries oriented towards the Russian market have suffered the most, such as textile, clothing, and vehicle manufacturing and electrical equipment production. Domestic market offers little support due to the need to accumulate resources to repay external debt. As a result, despite the fact that production volumes have declined, they still exceed effective market demand, which leads to further growth in companies’ stock volumes.
If sanctions against Russia remain unchanged for the next two years, the Russian market will not restore its demand for Belarusian products. The CIS market is largely dependent on the situation on the Russian market and cannot replace the shortfall in exports to Russia. In the short-term, reorientation towards markets outside the CIS is not feasible as it requires a new marketing strategy, which will take at least one year to elaborate. The most feasible option for Belarusian producers is to continue to reduce production, sell products with discounts, and optimise costs with lay-offs. If current level of production persists, stocks will continue to grow, non-payment risks will increase so as risks in the banking sector, and the National Bank will be prompted to turn on the money printing press.
The current decline in production was insufficient due to a significant decline in demand on the domestic market. If production is not further reduced to match the sales volumes, the negative effects on the economy may increase, including the risk of the national currency devaluation.
Following crackdown and arrests of participants in the spring protests, the authorities resumed arrests as punishment for participating in street protests in addition to fines, which for some time were the only punishment for political activity. On September 22nd, 2017, the riot police detained the Belarusian National Congress leader Nikolai Statkevich, the opposition politician was placed in detention centre on Akrestin street. On the same day, after serving seven days of arrest, another BNC leader, Vladimir Neklyaev, was released. He was sentenced for organising a street protest on September 8th against the West-2017 exercises. Other participants in the protest have been fined too. The authorities are likely to continue to use fines and arrests against political activists to punish for their protest activity.