Minsk relies on normalising relations with European Union in near future
The Belarusian government seeks to use the opportunities, which events in Ukraine have opened, in order to soften the EU countries’ stands. Authorities in Minsk believe the relations with the European Union could be improved on their terms, i.e. without any changes in domestic policy and without releasing political prisoners. Meanwhile, if the Belarusian authorities do not get sufficient resources to buy the population’s loyalty ahead of the presidential elections, they might tighten the environment for opposition activity.
Lithuanian Foreign Minister Linas Linkyavichus disagreed with some Lithuanian media that Russia might use Belarus to put pressure on Lithuania, including using territorial claims.
The Belarus’ Foreign Ministry has become more active in the EU countries, which has already yielded some positive results. Statements by Belarus’ officials in Poland, Lithuania, Hungary and some other EU countries, imply that the governments of these countries have started revising their attitudes towards the Belarusian leadership.
The Belarusian authorities pin hopes on the new EU member-states to soften their stands, because their reactions to the Russian aggression in Ukraine have been rather acute. Primarily, these countries include the Baltic countries, Poland and other countries of the ‘Warsaw Pact’, which have had a negative experience of the Soviet invasion in the second half of the twentieth century.
It should be noted that the Belarus’ Foreign Ministry’s main lines have not changed, rather gained a new dimension amid events in Ukraine: the current leadership preserves the county’s independence; President Lukashenko ensures political stability and secure borders, including migration policy. Belarus’ Foreign Minister Makei emphasised, that “We must pay a tribute, and Europe also has to acknowledge this, that it is due to the incumbent President, that Belarus has her own, independent foreign policy, no matter how difficult it is. Thanks to the current president, we preserved the independence, sovereignty and territorial integrity of our country”.
As evidenced by the World Ice Hockey Championships’ organisation, Belarus has ignored calls from Western capitals to ensure citizens’ political freedoms. When it concerned public safety, the Belarusian authorities traditionally used force. Before and during the World Ice Hockey Championships several dozen youth and opposition activists, including representatives of the independent media, were detained and arrested in Minsk and in the regions.
Belarus’ authorities will seek to normalise relations with European capitals in the near future. However, the Belarusian government will not improve the domestic political climate and will not release political prisoners.
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.