Q1 economic performance in the regions

Economic activity in the Belarusian regions is reducing. Only half of the regions report gross regional product’s growth. If current trends continue, annual GDP plan will be impossible to fulfill. Prime Minister’s resignation probability is increasing.

Regions fulfill most of the performance targets. Wages are growing, even foreign direct investment is increasing (traditionally a failure for the Belarusian economy). However, the greatest concern is about the gross regional product. GRP is ensured only in Minsk Oblast (105.4%), Brest Oblast (104.9%) and Grodno Oblast (104.5%). However, neither meets the projected forecast (108% -108.5%). In Minsk Oblast GRP growth is due to trade, not industrial production.

The most critical is the GRP situation in the Vitebsk region. This is the first Belarusian region to face recession. There GRP declined by 3.2% in Q1 compared with Q1 2012. This situation affected the economic performance of the whole country. In Q1 2013exports of goods and services decreased by 17.9%. One of the most significant reasons behind the decline was the decrease in petroleum products export sales (by 20.6% in value terms, by 15.6% in physical terms), as well as almost complete suspension of solvents exports.

Another negative trend in the regions is increase in loss-making enterprises and stocks accumulation. In the Grodno region alone in Q1 2013 stocks increased up to 81.8%. For example, in Q1 2012 Grodno region stocks accounted for 65.7%. As a consequence, a number of companies shift to 32-hour working week. As a result, industrial production will continue falling and consequently the regions will not be able to fulfill their annual GRP growth forecast.

In political context, regional problems may lead to the Myasnikovich’s government resignation by the year-end. Vitebsk Oblast’s economic problems reduce chances of Vitebsk Oblast Executive Committee Chairman Alexander Kosinets to take Myasnikovich’s place (previously there were rumors about the likelihood of such personnel reshuffle). In turn, Grodno Oblast’s good economic performance increase chances for the Grodno Oblast Executive Committee Chairman Shapiro. If positive economic dynamics continues in the Grodno region, Shapiro may take the PM’s place later this year.