Budget formation needs firm guidance

“Each of us contributes to the GDP,” believes the Head of the Belarusian State University’s Management Department, Boris Panshin

By Roman Overyanovsky

According to the specialist, we manufacture products and go shoping and, for the system to operate smoothly, stimulation is needed — via raised incomes, modernisation of production facilities and the construction of accommodation.

Building accommodation helps drive forward the economy, having a ripple effect over various spheres, affecting numerous companies and their employees. With this in mind, the Government has announced that loans for housing construction will continue. Naturally, accommodation is also essential socially, as many await homes of their own.

Mr. Panshin believes it to be vital to continue the modernisation of domestic enterprises, to allow us to successfully compete on domestic and foreign markets. However, budgetary funding must be allocated carefully, with only innovative projects able to generate revenue chosen. Accordingly, modern technologies, equipment and machinery remain a priority for investment, with much hope pinned on agriculture, wood processing, and the use of local resources.

Of course, steps must be taken to avoid emissions bringing devaluation and price growth, as seen earlier this year. Analyst Alexander Mukha believes we should be attracting more foreign investments (rather than relying on budgetary financing), alongside Belarusian business resources. Accordingly, business conditions and the business climate need continued attention. This year, many investors are being cautious, concerned by the situation on the foreign currency market. The Government hopes that, next year, the flow of foreign capital will strengthen, if inflation remains within 19-22 percent and the Rouble remains steady on the Foreign Currency Exchange.

Quality and quantity
Leading EU countries are aiming for GDP growth of 2-3 percent, so why has Belarus chosen a higher target? Mr. Mukha explains that our country significantly lags behind Germany and other global economic grands in terms of GDP per capita. Accordingly, we need to develop at a higher pace. “With this in mind, we need not merely to augment GDP but to change its structure,” he is convinced. He advocates not only stimulating the development of domestic exporters but creating new directions of production. We enjoy a profitable economic location and highly qualified staff (who are not too expensive).

Mr. Mukha views the steady flow of state-employed workers into the private sector as an important factor. To encourage this, additional stimuli are needed: from 2012, profit tax is to be reduced from 24 to 18 percent.  This should lead to increased labour efficiency, the state can cut its budget financing, and private businessmen will earn more and pay more taxes. This should improve Belarusians’ standard of living overall.

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