Warehouse stocks grow as Belarusian economy shrinks

Category status:
April 22, 2016 19:09

In January – February 2015 industrial enterprises’ stocks 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.

Similar articles

Belarusian authorities step up pressure on opposition before street protests
October 02, 2017 12:20
Image: "Новы Час"

During searches of social and "green" activists and anarchists, law enforcement has seized computers, mobile phones and publications. The authorities have also exerted additional pressure on supporters of unauthorized street protests and independent lawyers, who represented defendants in the White Legion case. The security services have stepped up the persecution of opponents before the street protests announced by the opposition. Apparently, the Belarusian authorities aspire that participants in street protests would reduce in number and that the low interest of the population to socio-political agenda before the local election campaign would retain.