"West-2017": Minsk will show a lot but not everything

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July 24, 2017 12:14
Image: AFP

Minsk is eager to make the “West 2017” Russo-Belarusian military exercise transparent as a manifestation of its ability to pursue an independent security policy in the region, which often goes unnoticed by the West and Ukraine, who expect from the Belarusian authorities more than they can afford.

The visit of Latvian Foreign Minister Edgars Rinkevics to Belarus was a remarkable event. For the first time, an EU and NATO member state said it was satisfied with the level of openness of the Belarusian authorities regarding the “West-2017” Belarusian-Russian military exercise, which would be held in September. Previously, Minsk heard only reproaches and demands.

The Belarusian authorities understand that the maximum transparency of the “West-2017” exercise is in their best interest. On the one hand, this would demonstrate a responsible regional security policy and Minsk’s independence. On the other hand, this would insure Belarus from unforeseen situations during the exercise, which could not be ruled out.

Nevertheless, demands of the neighbouring NATO countries and Ukraine regarding transparency during the “West-2017” exercise beyond the requirements stipulated by international agreements, have irritated Minsk. The Belarusian authorities treat it as an attempt on national sovereignty and fear that by meeting the demands of their neighbours, they would show their weakness and provoke new demands vis-à-vis Minsk. In addition, when putting requirements for Belarus, the West and Ukraine should understand that the interethnic nature of the “West-2017” exercise implies Belarus’ close coordination with Russia, including the transparency level for international observers.

For political reasons, Minsk is unlikely to be able to ensure full transparency of the “West-2017” Russo-Belarusian military exercise and international monitoring during the whole period of the Russian contingent's presence in Belarus. Nevertheless, the Belarusian authorities are likely to demonstrate the most possible openness during the exercise. That said, Russia could regard such openness as superfluous, while the West and Ukraine as insufficient. That said, a solution which could please all parties is unlikely to exist.

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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.