Main results of 2012: Belarus is becoming increasingly entrenched in the political framework of the Eurasian integration
Foreign Policy: coasting towards the Kremlin
The main result of the year in the foreign policy of President Lukashenko is preservation of the status of the sole mediator between the Belarusian political establishment and Russian elites both at the Kremlin and constituent entities of the Federation. This intermediary status guarantees him immunity in Belarus - at least for as long as he can provide a resource support to Belarusian economy from Russia, be it favorable prices for energy resources or credit support.
After the presidential election in 2010, the foreign policy of Belarus has not changed and is characterized by freezing of the Western direction with a gentle participation of Belarus in the process of Eurasian integration. Consequently, Lukashenko is increasingly isolated in the political framework of the new Eurasian Economic Union. The range of Lukashenko’s summit meetings in 2012 is limited to the leaders of Russia, Turkmenistan, Kazakhstan, Azerbaijan and Ukraine. We should also highlight Lukashenko’s visit to Latin America in June, including Venezuela, Ecuador and Cuba. The geography of trips abroad is also narrowed: in 2011 Lukashenko held nine visiting summit meetings, in 2012 - 8, and 4 out of the 8 meetings were held in Russia, 3 - in the "Latin American" tour, and one - in Ashgabat. Also, there is a trend of "domestication" of President Lukashenko. In 2012, he had 19 contacts at the summit level with the presidents of other countries, 11 of which took place in the capital of Belarus, and 6 of them were telephone calls, 3 of which - with Russian President Putin. To compensate for this trend in autumn and early winter, the President had to make a greater use of media tools, such as interviews the western mass media, meetings with Russian journalists and editors-in-chief of the CIS mass media.
Throughout the year, the President demonstrated a consistent and tough approach to the conflict with the West. In February-April, the authorities attempted to impose on the EU and the U.S. their own - in stages – scenario to fulfill the conditions set for Belarus, the main of which is the release and rehabilitation of all political prisoners. President Lukashenko announced his intention to conduct a political modernization and freed the former candidate A. Sannikov and his authorized representative D. Bondarenko. The authorities expected the West to give a similar response and start a gradual withdrawal of the sanctions. As this did not happen, Minsk just took "cosmetic" measures, such as the change MFA executive officers (S. Martynov to V. Mackey) and conducted the parliamentary campaign without any political repression. Thus, one may claim that the significant increase in international activity of the official Minsk after the appointment of Foreign Minister Mackey is due primarily to the initiative of Mackey himself. The key to resolve the political conflict with the EU and the U.S. is in the hands of President Lukashenko, and this greatly limits the MFA opportunities as an intermediary in negotiations with external partners of the Republic of Belarus.
Some of the authorities’ actions at the end of the year gave some grounds for believing that the governing group activated unofficial negotiations with the IMF on a new round of financial support. In particular, on December 14, the National Bank hastily stopped servicing client accounts of the law enforcement agencies (which had not been reported in advance), and on December 19, in Moscow, President Lukashenko requested the administration of the Russian Federation for a "low-cost" loan of USD 2 billion allegedly aimed for modernization of Belarusian enterprises. However, Lukashenko conscientiously does not conform to the main condition for the resumption of political relations with the West, i.e. does not release the remaining political prisoners.
* It is reported that on December 20 there was a parliamentary group "Initiative" established at the House of Representatives. The group is under the supervision of the delegate from Stolbtsy parliamentary division, N. Ivanchenko (the Presidential Advisor - Chief Inspector for Minsk Region). It is most likely that this group will play the role of the center of policy initiatives in the parliament controlled by the President.
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.