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 and Ukrainian Defence Ministries entangle in confrontation spiral
October 02, 2017 11:57
Фото: RFRM

Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.

The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.

Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.

For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.

Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.

The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.