25 February 2020, Tuesday, 11:05
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Lukashenka's Economy Is On The Verge Of Collapse

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Lukashenka's Economy Is On The Verge Of Collapse

Only a fantastic scenario can "save" the Belarusian economy.

In 2016 the economy drop may equal to 3%. Drop in exports is one of core reasons for the current recession. According to Belarusian economists, an export diversification could be the way out, however, this scenario is a fantastic one, experts say, observer of Belorusskiye Novosti Dzmitry Zayats writes.

Recession To Stay, If A Miracle Does Not Work

In January-August foreign exchange earnings from exports of goods amounted to $14.8 billion and decreased by 17.5% compared to the same period last year. Exports of services also decreased by 8.1% to $3.7 billion.

Given a serious drop in exports, Belarusian economists expect the decline in GDP will continue this year and the recession will remain unchanged.

"Today there are no grounds for an economy growth in Belarus. This year the fall of GDP is likely comparable to the level of the last year and will be around 3%," Mikhail Chepikau, senior lecturer, Economy Department, BSU, believes.

According to the expert, an economic recovery promoted by increased exports to Russia is barely possible.

"Russia has taken the way of import substitution and it has analogues of many Belarusian enterprises. So, it is useless to wait for a piece of cake on the Russian market, because then Russia will have to close down its own enterprises," Mikhail Chepikau notes.

At the same time, the expert states, world commodity prices (oil products and potash fertilizers) supplied to the EU and Asia by Belarus decreased and it caused the reduction of foreign exchange earnings of Belarus.

What can be the way out?

"The only way, by the way, a fantastic one is to flood the market with extraordinary goods. Why is it fantastic? Because the Belarusian public sector is not able to do it," Mikhail Chepikau believes.

According to the expert, it is barely possible that clumsy domestic state-owned enterprises will be able to produce something extraordinary and take the market.

By the way, the reforming of the public sector will be the key topic of the KEF (October Economic Forum) planned for this autumn in Minsk. Its organizers state that non-competitiveness of the public sector in Belarus is an evident fact.

Nevertheless, this sector takes the leading position in the domestic economy. Data for the first half of 2016 year show that there was about 80% of industrial production released by enterprises with a state capital.

It Is Getting Harder To Uphold The Status

According to observations of experts, the problem of many Belarusian state-owned enterprises is not even in the form of ownership, but in local ways of management.

"The core problem of state-owned enterprises is that their directors fear to take responsibility, they see that an initiative is liable to punishment and they are not ready to take risks. So, it does not make sense to talk about economic development of the sector," Associated Expert of the IPM Research Center Anton Dolgovechny says.

A private sector confirms that under the current tough control the silent position of leaders at state-owned enterprises is preferable.

"Inaction or extreme caution for top managers of state enterprises is the key to personal success and safety. They avoid challenges like changing the way of development," the chairman of the IPM Business School Dzmitry Dzichkouski says.

The situation in the Belarusian woodworking industry demonstrates that the existing system of management and control is able to generate criminal cases, but not the economic effect.

Therefore, experts suggest that the current system of management in view of its economic inferiority will have to be reformed.

The dynamics of bad debts of Belarusian banks which grow for ten months is the best confirmation of reform's necessity.

As of September 1, the share of toxic assets of banks reached 14.8% and has increased almost by half since the beginning of the year. The growth of bad debts, according to official statistical data, is mostly related to the inability of the public sector to service previous loans.

"It is almost impossible to maintain the status quo - the state has run out of its resources to sustain support to the public sector. We come to the point when certain steps on reforming of the sector are required," Anton Dolgovechny summed up in the interview to BelaPAN.

This week there has been the first signal for changes. The European Bank for Reconstruction and Development informed that the Belarusian government had asked it to deal with pre-sale preparations of five large state-owned enterprises .