Caution is the safest option for the country

We are facing an array of unsettling factors in the current economy

2015 will be here in less than a month but the Government has already realised that next year will be economically challenging
By Alexander Benkovsky

2015 will be here in less than a month but the Government has already realised that next year will be economically challenging

Agricultural machine building output is ‘trump card’ of Belarusian exports
Agricultural machine building output is ‘trump card’ of Belarusian exports

We are facing an array of unsettling factors in the current economy. Our neighbouring countries are experiencing difficulties; we are at the mercy of exchange rate fluctuations and falling oil prices. These all add to a general lack of optimism, but a plan of action aimed at reducing the negative impact of these external risks is ready and has recently been discussed by the Council of Ministers.

Belarus has macro-economic figures and a budget prepared in advance for 2015. The Government has been carefully managing the risks and attempting to predict fluctuations in the economy. In recent years, the Government has taken on enhanced commitments, but the results have failed to reach the planned targets. The President has given special attention to the issue; in recent weeks he was reported on the state of the economy, and demanded that ministers make decisions to remedy the situation immediately.

Accordingly, the target figures have been reassessed at a lower level. As a result, the pace of GDP growth is expected to make 100.2-100.7 percent, while the growth of real salaries is to make 101.4 percent (taking into account the expected labour efficiency). Belarusians’ real incomes are to rise by 1.5 percent.

In recent years, the Government has often relied too heavily on optimistic figures in outlining macro-parameters. They have now decided that caution would be a more prudent approach. As PM Mikhail Myasnikovich explained, this situation has arisen due to the fall in the average oil price of $83 per barrel (on the global market) rather than the previous $100. The Economy Ministry’s calculations clearly show our high degree of dependence on oil exports. If the raw material falls in price by $1 on the global market, then Belarusian exports will decrease by significant losses of between $200-300m.

The Russian Rouble exchange rate has also been taken into consideration while re-planning the budget. New calculations were made on the basis of an exchange rate in 2015 of 39-43 Roubles per Dollar. The fall of the Russian Rouble exchange rate (against the strengthening Belarusian Rouble) makes our produce expensive when sold to foreign markets.

The effects of this fall are, of course, far reaching. Many of our neighbours’ problems are a result of a decrease in exports; naturally, this has led to falling GDP and other macro-economic statistics. Measures to compensate for these low figures are difficult to implement but urgent. Initially, the Government proposed to fill the gaps with several unpopular measures such as the reduction of domestic demand and capital expenses (especially regarding projects with lost payback periods). Their current plan, however, is more constructive, that is, to encourage the growth of exports by offering the businesses easily accessible export credits thus increasing the number of potential customers. In addition, the bank interest rates and credit charges will be cut. Alexander Lukashenko paid special attention to this issue during the recent consultation, demanding those present to optimise banking expenses.

Anti-inflation policy will become another focus of the Government next year. As Economy Minister Nikolai Snopkov stressed, a draft project on pricing system improvement has been developed. The document, presently being studied by the Council of Ministers, envisages the strengthening of personal responsibility for exceeding targets relating to the parameters of the consumer price index.
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