FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT APRIL 2009
BELARUSIAN CURRENCY AND STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
The president, Alyaksandar Lukashenka, is
expected to continue to dominate the
political scene in 2008-09. He retains tight
control over the bureaucracy–including
regional administrators, and military, security
and law enforcement bodies–and will use
this to prevent the emergence of alternative
centers of power, and to discourage
potential rivals from seriously considering an
attempt to dislodge him. Mr Lukashenka will
also benefit from his carefully cultivated
public image as the indispensable leader of
independent Belarus, who protects the
country from all potential threats. This image
has broad appeal across Belarus’s political
spectrum. Other than token actions designed
to placate Western criticism, the regime will
take no steps towards political liberalization.
The Lukashenka administration will remain
closely tied to Russia. Russia’s focus on its
own commercial interests in relation to
Belarus–in particular, the long-standing goal
of its oil and gas companies to obtain
important distribution and processing assets
in Belarus–will continue to strain relations at
times. However, the two countries will remain
close partners, co-operating in international
and military affairs in the coming years. For
both countries, geopolitical imperatives will
transcend temporary disagreements,
especially as Russia is upset by US plans to
deploy anti-missile defenses in Poland and
the Czech Republic, and sees Belarus as an
integral part of its western defenses.
The government has thus hinted at a shift
away from its static and populist policies,
acknowledging the need for less extensive
subsidies to producers and consumers.
However, recent high-profile sales of stakes
in government-owned companies to foreign
entities do not herald a decisive shift towards
economic liberalization. The Lukashenka
administration derives much of its legitimacy
from tight state control over most aspects of
the economy and the prioritization of social
goals, such as full employment and
equitable income distribution. A wholesale
departure from these policies is therefore
unlikely.
Economic Performance
Real GDP growth in Russia, which remains
the single most important export destination
for Belarus by some distance, will slow, but
should remain strong, at around 7.5% in
2008 and 6.8% in 2009. The EU economy will
also slow, with annual growth averaging
1.3% in 2008-09. More important, with
respect to Belarusian exports to the EU, is
that world oil prices will remain high by
historical standards. Estimated that,
international oil prices of US$110/barrel for
dated Brent Blend in 2008, falling to US$91/b
in 2009. High average oil prices will continue
to provide a boost to Belarus’s fiscal and
external balances, and will help to limit the
extent of the expected output slowdown.
Pressure on government and enterprise
sector liquidity is likely to lead to a slowdown
in wage growth. This will reduce household
consumption growth, particularly as some
subsidies are being curtailed. Other factors
point towards a deceleration in growth,
including reduced scope for using spare
capacity to boost production. Loose fiscal,
monetary and credit policies should
nevertheless permit moderately strong
economic growth, and prevent domestic
demand from collapsing. It is expected that
real GDP growth will accelerate to 9% in
2008 before slowing to 4.5% in 2009.
Average inflation is expected to be 15.5% in
2008 and 15% in 2009, down from previous
forecasts of 17.3% and 19%, respectively.
The rise in inflation in recent months has
been less marked than anticipated, and now
inflation in Belarus is highly to decelerate in
2009, as falling oil prices will remove an
important source of inflationary pressure.
However, there is a considerable risk that
inflation will be higher than this. Given the
government’s unwillingness to embrace
economic liberalization as a way of
overcoming the difficulties caused by higher
energy prices, it will find itself relying
increasingly on inflationary policies.
Despite modest nominal appreciation in the
first seven months of 2008, owing to the
weakness of the US dollar, the central bank
is expected to allow the ruble to weaken
slightly against the US dollar later in 2008, in
line with a widening trade imbalance,
reduced external competitiveness and
growing foreign-currency bank deposits.
The current-account deficit expanded
significantly in 2007, to 6.6% of GDP.
Expenditure on imports will continue to rise
rapidly, as demand for consumer and
investment goods will remain strong.
Moreover, the rising price paid for Russian
gas will push up import costs in 2008-09.
Belarus will still benefit from high world
prices for its exports of oil products.
However, as in 2007, oil export volumes will
fall, owing to the less favorable
circumstances created by the bilateral
agreement reached with Russia at the start
of 2007. We forecast a current-account
deficit of around 7% of GDP in 2008 and
7.8% of GDP in 2009.*
* The Economic Intelligence Unit Ltd., October 2008.
Key Information Contacts
President of Belarus www.president.gov.by/en/
Council of Ministers www.government.by/en/eng_news.html
Ministry of Foreign Affairs www.mfa.gov.by/eng/index.php?id=2&d=contacts/links
Belarusian Telegraph Agency (National Source of Information) www.belta.by/en/
2007-MAIN ORIGINS OF GROSS DOMESTIC PRODUCT (%)
2007-MAIN COMPONENTS OF GROSS DOMESTIC PRODUCT (%)
Industry
Agriculture
Transport & communications
Trade & catering
Other
Construction
11.6
Private consumption
Increase in stocks
60
11.1
Public consumption
Gross fixed investment
Net exports of goods & services
52.3
50
26.5
9.5
40
30.8
30
6.4
20
10
34.9
2.4
0
-10
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