Economic sacrifices during election season

What changes await the economic policy of Belarus during election campaigns?

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The upcoming election campaign has already had its toll on the economic policy of Belarus. Last week the President voiced his dissatisfaction with the absence of economic growth and the wage increase. At the end of the meeting a monitoring group which will deal with these issues was formed.

Experts at Belapan, a Belarusian news agency, tried to predict the economic policy for the election year.

Attempts to revive the traditional economy

Last week the topic of economic growth has been mentioned at the official level several times.

On Tuesday, February 24 this topic was raised during a meeting of the Council of Ministers while discussing the development of Belarusian export. In the course of the meeting it became clear that a replacement for the Russian market, in which the demand for Belarusian products has decreased, hasn’t been found. According to Belapan, there were also facts presented which showed that the Belarusian economy has virtually made no progress in terms of export diversification.

During the meeting it was also discovered that as a result of geographical diversification Belarus started importing into 2 new countries, while export increased by $4.4 billion.

Other informative figures were also voiced; the enterprises of the Ministry of Agriculture, Ministry of Architecture, Ministry of Health and  Bellegprom Group are the ones who export the most (79-97%) to the Eurasian Customs Union (i.e. Russia).

In general, there is a direct dependence between Belarusian enterprises and the Russian market and if experts predict that in 2015 there will be a recession it is not hard to figure out how this will affect the GDP of Belarus.

Last week on February 25 deputies of the House of Representatives asked Prime Minister Andrei Kobyakov about the sources of Belarusian economic growth. After a long discussion the PM made the following statement: “The main point of growth is when all that we have modernized and built works properly”.

At the same time economists refuse to place their bets on the potential of the traditional Belarusian economy which is too dependent on Russia and isn’t competitive enough for other markets.

“It will be difficult to gain economic growth through traditional economy. Necessary conditions should be provided for an alternative economy which will bring results in 3-5 years,” said economist Kateryna Bornukova from the Belarusian Economic Research and Outreach Center (BEROC).

According to Kateryna, there should be less attention paid to the government sector and more steps taken towards developing the private sector.

“We have already made certain progress in this direction, but the latest actions taken by the Ministry of Trade in price control undermine the efforts made by other agencies to develop small and medium-sized companies,” assumed Kateryna Bornukova.

The topic was once again raised last Thursday on February 26 at a meeting with the President and government representatives. Alexander Lukashenko expressed his dissatisfaction with absence of growth. “All of this impacts the people. Real income is not growing,” noted the President.

As a result of the meeting a decision was made to organize a monitoring group headed by former Prime Minister Mikhail Myasnikovich. Its goal will be to find ways to boost economic growth.

At the same time, experts who were interviewed by Belapan see no real reasons why economic growth would increase in the current situation.

“The only resource that could be used to boost economic growth is administrative measures,” said the director of the IPM Research Center Alexander Chubrik.

“Internal and external demand leaves much to be desired. In the given circumstances there is little hope for economic growth,” noted Kateryna Bornukova.

According to the President of the Mises Scientific Research Center Jaroslav Romanchuk, Alexander Lukashenko saying that the government needs “to get out of their cabinets and engage in real production problem-solving” is more of a political statement than an economic one.

“This statement serves more for political purposes and doesn’t mean that it was the result of an economic analysis. Lukashenko won’t admit that the Belarusian economy is in recession, he won’t agree with the fact that the resource that fueled the economic model of the past 20 years has been exhausted,” noted Romanchuk during an interview with Belapan.

Russia will pay for Belarus’ stability

During the last election campaign which was held in 2010 economic growth was achieved through stimulating the economy on a large-scale. Experts hope that the events of 2010 will not take place this year.

“There will be no economic stimulus this year as it will give results opposite of those intended,” said Alexander Chubrik.

The economist believes that in current circumstances an increase in the money supply through economic stimulus (like in 2010) can have bad results.

“We don’t print Dollars or Euros, wage increase can only come from printing more Belarusian rubles. This will increase inflation and will have a negative effect on the national currency,” said Alexander Chubrik.

Economist Anton Boltochko is of the same opinion.

“It’s unlikely that the same policy as in 2010 will be reinforced this year. Exterior factors are very different from those 5 years ago. The economic crisis in Russia has worsened the financial position of Belarus and that is why there is less opportunity to stimulate the economy,” noted Boltochko.

Anton Boltochko considers that the most likely scenario is a stable national currency and last year’s GDP level thanks to loans from Russian.  With the help of price regulation, household purchasing power will remain at the same level as in January-February 2015 (i.e. after the depreciation of the currency).

“Today Russia isn’t ready to let events in Belarus unravel frivolously,” said Anton Boltochko. He predicts that Russia will provide the necessary financial support to preserve relative stability in Belarus.

As for post-election predictions – there is no one opinion among the experts. Russia’s financial support to Belarus has always been a political matter which cannot be explained by economic logic.

 

Text and image from naviny.by