The EU is one step away from imposing sanctions
Following the pronounced sentence to A. Sannikov on 14 May the "Belarusian issue" re-entered the international agenda. In the course of the past week the issue of human rights violations in Belarus and the issue of sanctions against its leaders were regularly discussed at the highest international level.
The verdicts against the Belarusian opposition were denounced by Ashton (on 15 May), Clinton (on 17 May), as well as by the Foreign Ministers of Germany, France, Poland, the Czech Republic and Russia (at joint meetings on 20 and 21 May). However, to the merit of Belarus, the views about sanctions are divided.
The lack of international consensus regarding the introduction of economic sanctions gives Belarus grounds to expect that the EU economic sanctions will not be imposed and it continues a tough line in sentencing the post-elections protesters.
Firstly, the re-opened discussions about the sanctions speak about the exhaustion of means to influence the situation in the country by the international community. Joint condemning statements by the USA, the EU and Russia issued in January and February had zero effect: individuals recognized as political prisoners remain behind the bars and courts continue issuing tough sentences to ex-Presidential candidates and demonstrators.
Secondly, such behavior by the Belarusian authorities puts the international community into an awkward position and pushes for a fro-active response. Hillary Clinton and Radoslaw Sikorski talked about it the most openly, calling for targeted economic sanctions against the Belarusian leadership, including a number of state enterprises-exporters. In particular, the media reported the "blacklist" of enterprises included state-owned companies Belneftekhim, "Triple", Beltechexport and Belaruskali.
However, the responsibility for the consequences of the economic sanctions has become a restricting factor. The positions of Russia and the Czech Republic, as well as the previous position of the Ukrainian Foreign Ministry about the futility of sanctions have a softening effect. The Foreign Ministers of these countries condemned the Belarusian government however opposed to the introduction of the economic sanctions, which could affect the population. Besides, Belarus managed to persuade the Lithuanian Minister of Transport and Communications E. Masiulis to defend its interests: on 19 May he talked about the dangers of introduction of such sanctions to the Lithuanian interests. Further, on 19 May it was announced that Belarus will not receive a loan from Russia as expected, which could be regarded as a kind of sanction. Additional economic sanctions are now able to put the EU in the position of the catalyst of the Belarusian crisis.
Thirdly, Belarus prepares a response and the Foreign Minister already warned about a possible travel ban for a number of Belarusian politicians. Also the delay in sentencing of N. Statkevich and D. Uss suggests that the Belarusian government reserves the option of pronouncing more or less severe sentences to the ex-Presidential candidates, depending on the outcome of consideration of the issue of sanctions.
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.