Forecast for 2017: System updates will continue without drastic changes in the economic, domestic and foreign policy

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January 03, 2017 12:11

In 2017, the Belarusian authorities are likely to attempt to preserve the existing economic model, which is based on state ownership, by reducing social protection for the population. Quite possible, under the pressure of external creditors, the authorities may update approaches to the  state property management.

The government is likely to pursue the policy of gradual waver of social protection to the population and to search for additional sources to replenish the state budget in people’s pockets by increasing housing and utility tariffs, business taxes, fines and other fees. In the case of a referendum to extend the term of office for the President and the Parliamentarians, the authorities may decide to make a financial injection to the state budget and key electoral groups.

As local elections draw closer, a debate among the society and power elite stirs up about enhancing the role of political parties and cosmetic amendments to the electoral law. The ongoing debate is likely to encourage all political forces with regional structures to participate in the local elections. The previously established cooperation between different opposition groups is likely to continue, but the opposition is unlikely to unite before the local elections.

The boycott and street protest strategies are likely to remain unpopular among the opposition and are likely to be promoted by the political structures in the emigration and those lacking human resources for campaigning in Belarus.

The authorities are likely to hold back on harsh persecution of the opposition and to focus on financial pressure targeting the most active opposition representatives in order to weaken the protest movement. The population is likely to demonstrate political apathy and is unlikely to come up with spontaneous protests due to the deterioration of well-being. The Belarusian authorities are likely to leave the public space ajar for the opposition to communicate with the population.

The struggle between nomenclature groups for dwindling state resources is likely to boost corruption prosecution by the security forces, which may strengthen the role of the latter and make the president more cautious of the staffing issues.

Belarus is likely to become more vulnerable vis-a-vis external pressure.

Moscow is likely to become more aggressive in pursuing its agenda. Again, Russia may raise the issue of her military presence in Belarus and taking control over some Belarusian defence enterprises; she may demand greater loyalty demonstration to the Kremlin (including large-scale bilateral military exercises, other than ‘West-2017’).

Most likely, the Belarusian authorities will continue to pursue an independent security policy. They are unlikely to allow a Russian military base in Belarus, or to give away control over domestic defence industry enterprises to Russia in 2017. The National Missile Programme is likely to become a priority and the authorities will ensure full funding for it.

In H2 2017, Belarus is likely to demonstrate new missile systems, elaborated with the Chinese support. The ‘Belintersat’ satellite communications system is likely to develop further and some projects aiming at deep modernisation of the combat air force are likely to be launched. Staff number of servicemen and border officers may increase up to 10%.

Major regional actors are likely to preserve current level of interest in Belarus in 2017.

The situation in Eastern Europe is unlikely to deteriorate. Russia nourishes hopes to conclude an analogue of Yalta with the new US administration. So, she is unlikely to take any steps which could aggravate the situation in the region and cause a negative reaction of the EU and the United States until the possibility of a Russo-American agreement on the division of spheres of influence is clarified. In fact, it may take the whole of 2017.

Amid anticipated higher oil prices in 2017, the resolution of the oil and gas dispute between Belarus and Russia could create favourable environment for the Belarusian food and textile industries, increase the demand for agricultural engineering and wood processing products. The chemical industry is likely to preserve neutral dynamics, while the situation in oil processing will largely depend on the final decision on the oil supplies to Belarusian refineries.

Construction, as a non-priority sector, is likely to continue to shrink. Fold reduction in soft loans for housing construction as compared with the previous years, and the lack of own funds by those eligible for better housing conditions would create poor conditions for the construction development in 2017. The industrial sector lacks or has insufficient funds for the fixed assets modernisations to increase investment significantly.

The retail trade will directly depend on the household incomes dynamics, that is, it is unlikely to grow significantly in 2017. The authorities are unlikely to switch on the printing press to ensure wage growth, therefore a slight wage growth will be offset by growth in consumer spending on utility services.

Oil prices will play a crucial role in Belarusian exports dynamics in foreign trade. In the case of oil price above USD 50 per barrel, trade conflicts between Belarus and Russia are likely to fade, and demand for Belarusian export goods on the Russian market may increase in quantitative and monetary terms (food, machinery and equipment, household appliances). If oil price slumps below USD 40 per barrel, a new wave of trade conflicts and mutual restrictions on the supply of goods is very likely.

One of the key events in 2017 will be the talks with the IMF over a new loan programme. Reaching an agreement could have a positive impact on the overall situation with the servicing of the external debt, lead to reforms in the state property management and could prevent further recession in the economy. The lack of agreement would be perceived by international lenders as Belarus’ unwillingness to reform the economy and as an attempt to rely on the aid from Russia and further cutbacks in social protection for the population.

Overall, in 2017, the Belarusian economy may grow within the forecast of socio-economic development for 2017, i.e. GDP growth at 1.7%, and the Belarusian rouble would be stable if the oil price was above USD 50 per barrel and a loan agreement with the IMF was concluded. Otherwise, the Belarusian economy downturn could continue and reach 2% of GDP. Wages in 2017 in dollar terms are likely to compare with those in 2016, but recipients of salaries are likely to reduce in number by 75 000 - 100 000 people.

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Belarusian and Ukrainian Defence Ministries entangle in confrontation spiral
October 02, 2017 11:57
Фото: RFRM

Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.

The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.

Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.

For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.

Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.

The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.