Massive Devaluation Under Preparation In Belarus?

Sad prognosis comes from the statements of the officials.

Fragmentary information about the authorities' plans to develop the economy in the coming year began to leak into the media recently. The list of predictions and the posts of some “prophets” inspire awe and respect.

The media outlet banki24.by plucked up all courage and analyzed the bloopers of the official mind.

A meeting of the presidium of the Council of Ministers was held on August 16. At the meeting, the responsible persons discussed the reality in which the country will live in 2018. Prime Minister Andrei Kabiakou said that the government and the National Bank were going to forward 7 important parameters of the forecast to Lukashenka for approval.

In the target variant of the forecast, Belarus's GDP will grow by as much as 3.4%, labor productivity - by 2.8%. And this is an amazing thing. Let us explain why this is so.

According to the forecast for 2017, the GDP should increase by 1.7%, the labor productivity - by 1.8%. This is logical: the forecast provides for a reduction in the number of people employed in the economy. In the forecast for 2018, everything is turned upside down. With the GDP growth of 3.4% and productivity at 2.8%, employment in the economy should increase by 0.6%.

However, the fact is that in the Belarusian conditions this is something unimaginable. Employment in the economy of Belarus has been falling steadily since July 2011. From June-2011 to June-2017 the number of employed fell by 351.5 thousand people!

Whence suddenly with the present demography we will have "extra" employees?

There can be several options. First, the authorities can begin a massive attraction of foreign labor (for example, from China). Secondly, it is likely that they will implement a new version of the Decree on "social parasites" with the most brutal methods. Perhaps, the authorities seriously expect to force hundreds of thousands of people to work. And, thirdly, a certain mix of the above-mentioned methods is possible.

Other interpretations, where the new employed might come from (except for the already mentioned ones) look too fantastic so far. The very mentioning the forecast for investment in fixed assets causes fear.

According to the authorities, investments in fixed assets will exceed the expected investments of 2017 by 6.8%. The forecast indicator for investments was not included in Lukashenka's decrees for several years. And this is by no means an accident. It was the investment pumping from the state before the crisis that led to the ousting of private investments and stimulated the growth of import from enterprises.

It is not a big secret that the products of the Belarusian producers are for the most part extremely import-intensive. In turn, distortions in the export-import balance led to the formation of holes in the foreign trade.

Previously, the government closed those holes by making new debts. However, as of today, the amount of debt threatens to exceed the maximum permissible limits. Hence, only the devaluation of the Belarusian ruble remains a radical solution to the problem of excessive investment.

It is not excluded that this is the way to achieve export growth of 6% and "practical balance" of foreign trade.

In 2018 Belarus will remain an investment desert. According to the official forecast, foreign direct investment on a net basis will amount to only $1.45 billion. For comparison: the forecast for 2017 is $ 1.4 billion, for 2016 it was $1.35 billion, for 2015 - $ 1.875 billion, for 2014 - $ 2.5 billion. None of the assessments of the authorities in recent years has been justified: investments were even less than they thought to attract in the government.

The forecast for 2017 remains under the threat of failure . It's no wonder: the proceeds from the sale of state property are almost zero for the first year, and foreign investors are not in a hurry to take on bankrupt factories.

The estimate of inflation looks interesting. For some reason, the authorities are not going to reduce its pace compared with 2017. The government and the National Bank believe that by the end of the year, inflation will not crawl beyond the limit of 7%. However, they set the same benchmark for themselves in 2018 as well. For what reason can the inflation slowdown stop?

For example, due to the easing of the monetary policy of the NBRB or by increasing the budget expenditures by the Ministry of Finance. By the way, the Ministry of Finance for some reason did not disclose an estimate of the increase in budget expenditures in 2018 in relation to the expected execution for 2017. There is only a percentage of income. The revenues of the republican budget next year will grow by 6.2%. This percentage is quite remarkable.

With inflation remaining at 7%, in essence, the authorities are only aimed at maintaining real budget revenues at the level of 2017. And this is at best. Now the GDP deflator, through which the nominal budget revenues are translated into real, exceed the consumer inflation.

Therefore, if everything remains unchanged, we are facing a reduction in real budget revenues. Of course, there is a reservation that the draft budget is planned based on a conservative estimate of the growth of the economy - by 1.1-1.2%. Therefore, real budget revenue growth is possible, but with a 3% increase in the GDP.

The recent statements on the "retention" of the salary at the level of December immediately after the New Year are also fairly worrisome. The fall of the January salary in relation to December by 10-12% is a natural process in our economy.

If they force the enterprises pay extra-high salaries also in the “dead” winter season, this will do no good. Especially in the domestic currency market. However, these ambitious plans may appear just imitation of vivid activity, and the officials might be just following the ordinance of Peter the 1st - a subordinate must look reckless and silly before the authorities, so that not to embarrass them with wit.