Minsk is attempting to remove barriers in relations with Astana

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June 12, 2017 12:09
Image: Belarus Security Blog

Minsk has used political contacts with Astana to balance the Kremlin’s actions, however, recently Belarusian and Kazakh interests have been at odds on some issues. Apparently, the Kazakh leadership has a cautious attitude towards the Minsk’s attempt to initiate a peacekeeping process on the international agenda. Meanwhile, preserving acceptable cooperation levels with Astana within the Eurasian space is of key importance for Minsk.

Next week, President Lukashenka will make a working visit to Kazakhstan, where he will attend a meeting of the Council of Heads of State of the Shanghai Cooperation Organization.

Kazakhstan is ready to support Belarus on the international arena as long as it is in line with Kazakh interests and not in opposition to the Kremlin. Over the past 20 years, bilateral relations between Minsk and Astana were free from serious complications.

Economic ties between Belarus and Kazakhstan are insignificant and the latter appears to be more interested in the integration with China. That said, cooperation with China is a priority for the Kazakh leadership and Minsk may even regard China as a rival. Apparently, the meeting should remove this tension and, possibly, strengthen mutual interests.

Kazakhstan has made attempts to become a negotiating platform for the Syrian conflict. Meanwhile, Minsk has attempted to seize this initiative, and the Kazakh leadership is unenthusiastic about it. This initiative is crucial for the Belarusian authorities and, according to them, Astana should take a back seat on this matter.

Minsk and Astana are competing for the Kremlin’s attention and are not willing to cave in to mutual claims, which could cause tension and conflicts. Nevertheless, both have common interests within the EEU framework, which is dominated by Russian lobbyists. Hence, by joining efforts, Belarus and Kazakhstan could stand against them more effectively.

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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.