President Lukashenko takes hardline vis-a-vis Poland

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April 22, 2016 19:01

Amid the crisis in Ukraine and in the absence of resources to pump people’s incomes, the Belarusian authorities attempt consolidating society ahead of the elections by using an ‘external enemy’ factor and focus on maintaining political stability and keeping destabilising factors under control. In this context, Lukashenko traditionally toughens rhetoric in relation to Poland and the Polish minority organizations. In this way, the authorities not only seek to ensure support by the most ‘disloyal’ Grodno region, but also want to influence the Polish foreign policy towards Belarus ahead of the presidential elections.

President Lukashenko made a working visit to the Grodno region and held a meeting in the Grodno Oblast Executive Committee, during which he touched upon the ‘Polish issue’.

The president is very wary of the Grodno region and regards it as one of the least loyal. Before his visit to Grodno, President Lukashenko met with the KGB Chairman Vladimir Vakulchik and asked for information about the situation in region. In particular, he said, “not only that I am wary of it, I remember how it was before. There was the only case in the county when the governor was shot. ... I know, that some states have overwhelming ambitions in the Grodno region”. In addition, the President drew particular attention of the KGB to the fight against corruption and reminded that the change of power in Kyiv and the conflict that followed were mainly due to the high corruption levels.

Traditionally, Minsk accuses Warsaw of manipulating the ethnic Polish minority in Belarus, which mainly resides in the Grodno region, and of attempts to influence the domestic political landscape.

It should be noted that the Belarusian authorities usually increase repressions against the Polish minority organsations in the pre-election period and exacerbate relations with Warsaw. For example, in early 2010, during the thaw in the Belarus-EU relations, the Belarusian authorities had forced leadership change in the Union of Poles’ Ivanets branch and transferred the property of the Polish House to the loyal Polish minority organisation. In 2005, one year before the presidential elections, the Union of Poles in Belarus was prompted to split into two organisations. In both cases, Poland recalled her ambassadors to Warsaw for consultations. 

While in Grodno, the Grodno Oblast Executive Committee reported to Lukashenko about the prospects for socio-economic development in the region and the latter once again underscored, “I have no intention to flirt with anyone. Flirting leads to the collapse, disintegration of the state. As soon as we start dividing our country based on nationality, you know what will happen – there is an example in the south”.

Apart from some security issues raised by Lukashenko in the Grodno region, the main topic for the discussion was the development of the energy system in Belarus and the construction of hydroelectric power plants. Grodno hydroelectric plant, built in 2012, has 17 MW generating capacity and is the leading hydro-power plant in Belarus. Belarus has plans to complete the construction of other hydro-power plants in 2015: Polotsk hydro-power with generating capacity of 21.75 MW, Vitebsk hydro-power (40 MW, both on the Western Dvina), and Neman hydropower (20 MW) on the Neman River. However, currently Belarus has no resources to implement large-scale projects to ensure her energy independence. Lukashenko therefore said there was no need to boost these plans’ implementation, “If today, or at least tomorrow, but not the day after tomorrow the desired effect is not achieved, then we will think what to do next. If I had spare money, I would have invested. But in the current circumstances, the question is whether we should spend such amounts on it and build these stations”.

It is clear that when the presidential campaign starts, the main candidate will not put the focus on the economy. Therefore, the focus will be on preserving the political stability and the fighting against ‘destabilising’ factors (primarily corruption). In this context, the authorities are likely to step up repressions in relation to the non-registered Union of Poles in Belarus.

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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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