Presidents Lukashenko and Nikolić played on the public
On March 12th – 13th Serbian President Tomislav Nikolić was on the official visit to Minsk
Belarus’ main goal was to demonstrate the image-making breakthrough in the Belarus’ political isolation on the eve of talks with Russian President Putin. However, there will be no real strengthening of the political cooperation between Belarus and Serbia and with the European Union using Serbia’s mediation.
Tomislav Nikolić’s surprise visit to Minsk played into the Belarusian authorities hands for several political reasons. First, the Serbian President arrived in Belarus right after talks with Ashton in Brussels about the disputed status of the Serbian community in Kosovo and about the Serbia’s accession to the EU. Belarus is known for her tough stance on condemning the war in Serbia and Kosovo’s sovereignty, and the visit gave President Lukashenko the occasion to demonstrate his position to the European Union, the US and Russia once again.
Second, on the eve of the Supreme Council of the Union State of Belarus and Russia meeting in St. Petersburg on March 15th, Belarusian leadership was interested in demonstrating to the Kremlin the demand for Belarus not only in Russia but also in other countries, especially in Europe. Since 2010, the Belarusian president’s international contacts have been consistently and compulsively narrowed, primarily looping on Minsk-Moscow relations.
Nevertheless, the talks between Nikolić and Lukashenko and the set of signed documents do not suggest the political cooperation between Minsk and Belgrade will be strengthened significantly. Currently, Belarus and Serbia hold complex negotiations with their by far more powerful partners (the EU and Russia respectively) therefore they are interested in demonstrating, at least, “political alibi” to their counterparts. At the same time, both countries are seriously limited in their political maneuvers.
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.