Lukashenka's Economy Is Still Weak, Economists Say

It's too soon for officials to get excited.

The structural and institutional weakness of the economy remains in Belarus.

Despite the growth of the cyclical component of Belarus' GDP, the trend component of GDP has been declining for 44 consecutive quarters (over the last 11 years) in Belarus.

The Belstat's report for the first half of the year says that " for the first quarter of 2017 the second evaluation of GDP was carried out by three methods (production, use of revenues, formation of GDP by sources of income), ekonomika.by writes.

As a result, in the first quarter of 2017 GDP was 22.5 billion BYN in current prices, or 100.4% in comparable prices to the level of the first quarter of 2016." Thus, we can officially consider that the Belarusian economy has emerged from a state of recession.

Although, if we consider the quarter to the previous one making an adjustment for seasonality, then it emerged from the recession in the 4th quarter of 2016.

Meanwhile, the trend component of Belarus' GDP continues to decline. In the 1st quarter of this year it reached the value-minus 3.2% to the corresponding quarter of the previous year (Figure 1). In the fourth quarter of 2016 it was minus 3.0%.

The trend component of GDP has been declining for 44 consecutive quarters (over the last 11 years - from the 1st quarter of 2006) in Belarus. The last 11 quarters - from the third quarter of 2014 - it is in the negative range.

Given that the average trend dynamics for the last 4-8 quarters was in the range minus 2.3-2.8%, it can be assumed that the potential (trend) of the Belarusian economy remains at the level of minus 2-3%.

At the same time, the cyclical component of Belarus' GDP grew by 3.6% in the 1 st sq. of this year. The last time such growth was observed in late 2014.

This confirms the opinion of some analysts that the current restoration of the Belarusian economy is primarily due to the improvement of terms of foreign trade, external financing. Perhaps, measures to mitigate monetary and credit policies and income policies gradually begin to manifest themselves.

At the same time, as a result of the lack of market reforms and persistence of ineffective administrative and command distribution of resources, the structural and institutional weakness of the economy remains. This does not allow using long-term growth factors and increasing the driving force of the economy.

The impact of cyclical factors can give a short-term effect. For example, expansionary actions of monetary or fiscal policy, higher prices for export goods. They can improve the economy to the trend or above it (as it happens now), but it is not possible to change the trend itself.