Due to dialogue with EU Parliament political environment in Belarus could improve

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July 24, 2017 12:09
Фота: Наша Ніва

Minsk is attempting to use various communication platforms to improve its image on the international arena. The Belarusian leadership has demonstrated openness to dialogue on human rights and democratisation issues. In all likelihood, the Belarusian authorities could gradually enhance the role of political parties before the local election campaign.

The European Parliament has been prompted to communicate with Belarusian MPs due to the new situation, when there is a need for communication channels with Minsk.

The Belarusian civil society is discussing the fact that the opposition has lost the monopoly on contacts with European bodies, hence, could lose the support in the Belarusian-European dialogue. The European Parliament has always been more harsh on Minsk and since mid-2000s, had no contacts with the Belarusian authorities. In addition, civil society is concerned about the composition of the EP delegation, which includes some European MPs loyal to the Kremlin.

Most likely, Minsk would like to boost its presence in the European information space to improve investment attractiveness and credit support. The Belarusian authorities aspire to mitigate criticism and tough resolutions of the EP. In addition, Minsk hopes that the EU Parliament would revise its position as regards Belarusian MPs’ participation in the Euronest PA.

The Belarusian authorities also demonstrate their readiness to somewhat improve the domestic political environment and expand opportunities for the opposition. The Belarusian authorities’ actions are likely to remain inconsistent, albeit repression are likely to weaken. Meanwhile, supporters of the protest activity would continue to test the authorities, and should mass protest activity increase, the law enforcement could react harshly.

Overall, the Belarusian authorities could step up the role of elected bodies in the decision-making in order to relax tension in society and absorb the protest movement.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

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