Alexander Lukashenko delivered State of the Nation Address to the Belarusian people and the National Assembly.
On 8 May Alexander Lukashenko delivered his annual address at the National Assembly.
There was an intrigue over the address as it had been unexpectedly postponed. In such a situation, the most unpredictable sensations could have been expected. However, Lukashenko’s performance did not bring anything sensational. On the contrary, it was one of the least colourless and seemingly meaningless annual addresses ever. The lack of clear vision (namely, in terms of geopolitical choice) could be regarded as a key message of Alexander Lukashenko. By doing so, he makes it clear to the outside world, and to Europe in particular, that he is ready to begin a dialogue with the West \"from scratch\". The President declared his willingness to resume the dialogue with the European Union, which is viewed as an important partner and political vector. At the same time, he attempted to avoid using his traditional offensive clichés to the West.
He once again outlined the list of issues which he is ready to discuss and make concessions on, such as the possible amnesty of the political prisoners on the Independence Day, a moratorium on the death penalty, the preparation and holding of the election campaign, the security of the western border.It should be pointed out that Alexander Lukashenko behaves very cautiously while touching upon these issues. He did not make any special commitments or obligations, he just outlined the range of issues and made it clear that there might be a significant progress in dealing with them. This was most obvious when he spoke the moratorium on capital punishment. On the one hand, he defended this practice, but on the other hand, he ended his statement with the words: “Maybe our society is ready to introduce a moratorium or ban capital punishment. Then we will make the decision together”.
While speaking about Russia, he avoided any evaluation, although the context of his address demonstrated that the Eastern vector and Eastern integration are not top priorities for Belarus.
He stressed out a deep interest in cooperation with China and the developing countries.
In terms of internal policy, Lukashenko made it clear that there would be no radical reform of the current social model. Welfare state is a fundamental value for him. However, he admitted that the existing model had outlived itself and needed transformation. He spoke a lot about modernization (“A new age needs a new economy”). However, he did not offer a clear vision of the modernization. The President restricted his speech to stating general principles, such as innovation, investment, etc.
Lukashenko also very carefully touched upon the issue of privatisation. In general, he did not object to privatisation, although he brought about too many “buts”. It is evident that he personally does not have a clear outlook on this issue. The most worrying statement was his promise to increase average salaries to $500 by the year-end. According to the experts, such a decision may trigger new crisis phenomena in the Belarusian economy.
On the eve of his address to the parliament, Alexander Lukashenko issued Decree № 6 \"On the stimulation of entrepreneurial activities in the medium and small towns and rural areas\" which was positively estimated even by the opposition-minded experts. This decree shows that the President is willing to make steps to liberalize the economy.
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.