ANNUAL REPORT JUNE 2010
FEDERATION OF EURO-ASIAN STOCK EXCHANGES
BELARUSIAN CURRENCY AND STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
The president, Alyaksandar Lukashenka,
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 centres of power, and to discourage
potential rivals from seriously considering an
attempt to dislodge him. Opposition parties
will continue to co-ordinate their strategies to
some degree, but will still face limits on
political participation and expression, and will
remain divided along ideological lines.
Nevertheless, the economic recession
expected in 2009, exacerbated by a
deterioration of Belarus's energy terms of
trade, brings risks.
Engagement between the Lukashenka regime
and the EU and US is likely to continue to
increase, in a context of concerns about the
threat to Belarusian independence from a
resurgent Russia and Mr Lukashenka's desire
to attract more Western investment. However,
Mr Lukashenka's reluctance to accept the bare
minimum of political openness demanded by
the EU and the US will limit the improvement in
ties with the West, and the process could be
subject to reversal if Mr Lukashenka feels that
it is not bringing the expected benefits.
Belarus 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.
Economic Performance
The government's statist economic model will
come under strain in 2009-10 as a result of the
impact of the global recession. Belarus agreed
a US$2.5bn 15-month stand-by agreement
with the IMF in December 2008. However, the
Lukashenka administration derives much of its
legitimacy from tight state control over most
aspects of the economy and the prioritisation
of social goals, such as full employment
and equitable income distribution. A wholesale
departure from these policies is therefore
unlikely, and the government will avoid
far-ranging economic restructuring or
deregulation, although limited improvements
in business regulation are possible.
Russia, Ukraine and the EU, which are
Belarus's leading export markets, will
experience recession in 2009. Real GDP grew
by 10% in 2008. However, the global credit
crunch and the fall in export revenue will
seriously constrain the authorities' ability to
maintain the loose fiscal and credit policies
that have previously supported growth. A
further rise, on average, in the price of Russian
gas will place further strain on the economy.
The rubel was devalued by 20.5% against the
US dollar at the beginning of January and has
subsequently weakened further, despite
interventions by the National Bank of the
Republic of Belarus (NBRB, the central bank)
on foreign-exchange markets to support the
currency.
The trade deficit widened in 2008 and in the
first quarter of 2009. Although high export
prices supported a strong export performance
for much of 2008, imports also rose rapidly,
partly because of high energy prices, but also
because of rising domestic demand, and have
been slower to correct following the collapse
of exports from the final quarter of 2008. The
current-account deficit in 2008 was 9.4% of
GDP and is forecast to narrow to around 6.5%
of GDP in 2009. On the one hand, exports will
fall owing to recessions in important markets.
On the other hand, limited access to external
financing will force a marked correction to
domestic demand, and imports will therefore
fall even more sharply. The deficit will contract
in 2010, to 5.5% of GDP, as exports pick up
more quickly than imports.*
* The Economist Intelligence Unit Limited, May 2009
Inflation decelerated in the final months of
2008, and after a brief spike in the first two
months of 2009, under the impact of currency
depreciation and gas price rises, has since
resumed its downward trend.. Average annual
inflation will therefore fall from 14.8% in 2008
to 12.1% in 2009 and 10% in 2010.
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/
REAL GDP
(BYB millions)
CONSUMER PRICES (% CHANGE PA; AV)
(%)
18 15
16 14
14 13
12
12
10
11
8
10
6
4 9
2 8
0
7
2005
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