Appearance of “state-driven” rumours speaks about authorities’ weakness

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April 22, 2016 18:23

The spreading of such rumors shows both the existence within the authorities of the opposing fractions and the desire of the authorities to assess in such a way the reaction of the foreign partners and of the Belarusian society to the extremely controversial government decisions. In general, similar rumors speak about the weakening of discipline within the state apparatus.

On 12 December the information appeared in the media that a Russian aviation base could be established in Belarus. On 13 December the press-service of the MFA rejected the rumors about issuing 650 000 working visas to the Chinese citizens.

The rumor about the possible appearance of the air base in the Republic of Belarus in response to the activation of the NATO forces in the Baltic States was spread by the site "Belarusian military-political review," which is supported by the people from the law enforcement structures of Belarus. The information was published with a reference to an anonymous source in the Ministry of Defense on the next day after the meeting on the Council of Defense Ministers of the CIS held in Moscow. Earlier former presidential candidate Y. Romanchuk spread the information making reference to the well-informed source that the Belarusian authorities have issued already 650,000 working visas for Chinese citizens for the year 2013.

It is very likely that both rumors are the test of the reaction of the stakeholders, both abroad and in Belarus, on the extremely controversial, but necessary decisions of the ruling group. The continuation of integration with Russia and the development of the business relations between Minsk and Beijing eventually would lead also to the questions on the closer military cooperation and labor migration from China.

It is obvious that these decisions are contradicting the interests of various groups inside the government. In particular, it is assumed that the conventional group of the new Foreign Minister Mackei seeks to renew the relations with the EU and the U.S., and therefore is not interested in activating the military cooperation with Russia or in business cooperation with China. And on reverse, the conventional "group of Lukashenko’s family" after December 19, 2010 seeks to extract the maximum profit from the eastern policy of Belarus (Russia, China).

Nevertheless, the use of the rumors by the both conventional groups points out the general weakening of the discipline inside the apparatus of power and confirms the assessment of the crisis of the system of the state administration. In this situation it will be more complicated for President Lukashenko to carry out the necessary decisions because his subordinates will try to wriggle out the responsibility.

In particular, the recently issued Decree 9 was very poorly supported by the state media and by the state officials, especially in the relevant field related establishments. Besides, the external players if necessary could use the rumors injected into the information space to deteriorate the political situation, for example, during the next presidential campaign.

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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.

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