President Lukashenko visits Qatar, Prime Minister Myasnikovich goes to Moscow

Category status:
April 22, 2016 17:50

On 15 August President Lukashenko paid an official visit to Qatar and Prime Minister Myasnikovich met with Putin at a meeting of the Council of Ministers of the Union State in Moscow.

Comment

President Lukashenko has gradually transferred the right to negotiate with the key Belarusian partner, the Kremlin, to Prime Minister Myasnikovich. Nevertheless principal political and economic decisions are still made by the President.

Firstly, the visit of President Lukashenko to Qatar meant to improve his image. The president had to expand the geography of his visits, which, after 19 December elections has been particularly narrow. There were no principal agreements reached in Qatar, the parties have signed a number of minor bilateral agreements and made a number of limited declarations of intent with regard to investment.

Secondly, the president needed to compensate for the political effect of the meeting between Prime Minister Vladimir Putin and Myasnikovich in Moscow. Russia is a key economic and political partner of Belarus, and trustworthy relationship with the Russian leadership has always been the key for retaining of power by Lukashenko. Given that during the past year the Belarusian President does not enjoy the same level of confidence from the side of Vladimir Putin and Dmitry Medvedev, the role of a negotiator has been transferred to Prime Myasnikovich, who thereby increases his political influence.

For President Lukashenko it is important to “blend” the increasing role of Prime Minister Myasnikovich, therefore he uses his international visits (to keep up appearances) and takes full control over the process of privatization. A conference held on 12 July on Customs Union and Common Economic Space showed the Prime Myasnikovich has no control over Russian-Belarusian talks concerning privatization of Belarusian assets. Back then the Prime Minister listed 12 companies negotiations on the sale of which allegedly took place with Russian counterparts, however later the information was denied by Russia. Also, on 18 August General Director of "Belaruskali” announced the unacceptability of loan conditions set by a Russian bank Sberbank and a German bank “Deutsche Bank” with regard to the loan that has been preliminary agreed.

Similar articles

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.

Recent trends