Lukashenka Is out of Touch with Reality

Government's five-year plan on GDP growth looks fantastic.

Last week Lukashenka approved a program of socio-economic development for 2016-2020 years. Ways to achieve ambitious economic growth rates are not clear enough.

This document assumes GDP growth of 12.1-15% in the period from 2016 to 2020 year. But it is barely possible. The first year of the five-year plan ends with a negative growth. Over 11 months the drop in the economy amounted to 2.7% and the end of the year will hardly be better, thinktanks.by writes.

"Two years of this five-year period, 2016 and 2017, will end up with a negative GDP growth. Little to no variants. Today there are preconditions for economic growth in 2017. Under the best of circumstances we will take a zero growth. And it is not clear how the government will manage to achieve such a high growth rate," expert of BEROC Katsyaryna Barnukova points out.

It should be noted that the planned government's growth rate for 2017 equals to 1.7%. However, according to forecasts of international financial organizations and independent research centres, the fall of the economy will continue next year. It relates to the fact that there have not been created new sources for growth in our country, and the ability to use old drivers of growth is doubtful.

"It is not very clear how the situation with oil supplies from Russia will develop. Today the Russian side considers the possibility to reduce the volume of oil deliveries, which means that the revenue from refining can hardly increase next year. It is not possible to generate growth by domestic resources. No essential reforms have been taken in 2016. At the moment all the reformation has narrowed down to reduction of social support to the population, while the real sector still receives the state assistance," Katsyaryna Barnukova stressed.

A specific reform plan that would promote economic growth is specified neither by the program for next year nor by the five-year plan. According to official reports, the growth is expected through implementation of three goals: attraction of investments to innovate the economy, provision of an effective employment at new jobs, rise in exports to reach a positive trade balance.

However, the specific steps which may promote greater success in these goals are not specified.

Katsyaryna Barnukova notes that in spite of the declared plans the investment volume has lately been declining.

"Obstacles not allowing foreign investments to Belarus are commonly known. So far no clear actions on privatization of interesting assets have been observed, as well as no attracting conditions for greenfields have been created. Investors consider investments in the Belarusian economy too risky. Public investments are not effective. The country accumulates debts and spends money on their service, and purchased machines are not needed," the expert believes.

As concerns the improvement in the trade balance, it is only possible if world prices will prevail in favor of Belarus in a five-year term. For example, if oil prices increase and conditions of deliveries will be profitable enough to receive a good income from exports of petroleum products. A rise in world market prices for potash fertilizers will be favorable, however, there is no guarantee that it will happen.

"Belarus may restore exports to Russia a little due to recovery of the Russian economy. However, the restoration of pre-crisis volumes is hardly possible. The problem resides not only in drop in purchasing power in Russia, but in the lack of competitiveness of Belarusian goods. And the Belarusian economy does nothing to enhance it," Katsyaryna Barnukova believes.

A five-year plan intends measures on emancipation of business initiative and reduction of control over business activity. If these measures are implemented, this will promote the development of the private sector. It is barely possible that it will cause a significant growth. The public sector still dominates in the economy, and any growth is barely possible without its restructuring.

The inflation, according to a five-year plan should equal to 5$, is another weighty factor. According to Katsyaryna Barnukova, "plans for inflation may turn to be realistic in case the National Bank of Belarus preserves its independence and if the tight monetary policy maintains. The growth of inflation may occur in case of an attempt to return salaries to the level of 500$ and economic growth stimulation to reach the forecast for GDP."