Republic of Belarus
The Federation of Euro-Asian Stock Exchanges
Economic Development and Outlook
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The global COVID-19 shock, tensions with Russia on crude oil supply terms, and lower global energy prices were a drag on growth, with the economy contracting by 1.3 percent year-on-year (y-o-y) between January and August 2020. In addition, following a contested outcome in the August 9 presidential elections, investor confidence and economic activities have been further impacted by political unrest.
Falling remittances, a weaker Russian ruble, and heightened household foreign exchange demand led to a 26 percent depreciation of the Belarusian ruble relative to the U.S. dollar in January–August. Banking liquidity pressures have increased as deposit withdrawals have accelerated, with foreign exchange deposits falling 6 percent month-on-month in August. International reserves have fallen 20 percent since January (by US$1.4 billion in August alone) and have reached roughly US$7.5 billion (fewer than three months of imports).
Public and publicly guaranteed debt amounted to 43.3 percent of GDP. External financing needs have been partially alleviated by a US$1.25 billion Eurobond issuance and by US$145 million in bonds issued on the Russian market, as well as by the restructuring of loan terms for the construction of a nuclear power plant. Real household income continued to grow in the first half of 2020 on account of increased wages and pensions. The national poverty rate fell 0.3 percentage points in 2018 and declined further to reach 4.7 percent in the first quarter of 2020.
The economy is expected to contract by 2.8 percent in 2020, reflecting the drag from COVID-19 and the economic repercussions of increased political tension. The recession is expected to deepen in 2021, reflecting a significant retrenchment in household spending and investment demand due to heightened uncertainty and the lack of fiscal and monetary policy space to support the economy.
Long-standing structural challenges related to the growing number of loss-making SOEs, the high degree of dollarization, and external vulnerabilities are expected to weigh on the recovery thereafter. The outlook assumes fiscal consolidation, which is necessary to prevent the twin fiscal and current account deficits—reflecting the impact of the withdrawal of Russian energy subsidies—from widening to unsustainable levels and to contain financing pressures related to large debt repayments that are coming due.
The recession will negatively affect household welfare unless targeted cash transfers are expanded, as other support instruments will be constrained by the limited fiscal space. Poverty impacts are expected to be more significant at higher thresholds, as the last recession of 2015–16 was associated with a 2 percentage point increase in the national poverty rate and a 15 percentage point increase in the share of the population below the minimum consumption budget.
Source: www.imf.org