Minsk fears interference of Warsaw with Belarus-EU normalization
Official Minsk anticipates that positive trends in Belarusian-Polish relations may curtail. However, the Belarusian authorities hope that Warsaw will not block the normalization of Belarusian-European relations. Otherwise, Minsk would launch a usual anti-Polish campaign in the media and would put pressure on unregistered Polish minority organisations in Belarus.
Last week, President Lukashenka congratulated Andrzej Duda on his election as President of Poland. Duda’s election as Polish President has struck a warning note for the Belarusian authorities. Even thought the Belarusian authorities hope that Poland would continue to support the EU policy of normalizing relations with Belarus, they are nevertheless ready for some cooling in Belarusian-Polish relations.
In addition, Belarus believes that Poland will be somewhat restrained by the general European trend toward normalization of Belarusian-European relations. Ideally, Belarus would like to formulate a relatively neutral bilateral agenda with Poland, which would focus on cross-border and pragmatic economic cooperation.
The newly elected Polish president is known for his tough rhetoric vis-à-vis Russia, Belarus therefore hopes that he will take into account its "balanced" position on Russian-Ukrainian relations. The authorities also emphasize the potential threat to the independence of Belarus, which, they believe, could become an important lever to influence new Polish leadership. Belarus would do her best to position itself as a deterrent to the Kremlin’s aggressive policy.
The Belarusian opposition, in general, has positively assessed Duda’s election. They hope that Warsaw will strengthen its principled position vis-à-vis the Belarusian authorities and will increase support for civil society. For instance, some representatives of the academic community are looking forward to Warsaw’s assistance in founding the Belarusian National University.
In addition, it is quite likely that the Belarusian authorities may strengthen their ‘anti-Polish rhetoric’ and resume repressions against members of the unregistered Union of Poles – which they conventionally do ahead of presidential elections in Belarus.
All in all, the Belarusian authorities reckon that new Polish President Andrzej Duda would not seriously exacerbate relations between Minsk and Warsaw, and would allow some criticism of the situation inside Belarus.
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.