Crisis Begins?

Belarus has failed to export to the "far arc" countries.

A fall in exports usually means a decline in foreign exchange earnings. The latter already leads to a shortage of foreign currency in the domestic market. Banki24.by writes about the current situation.

Russian sanitary services are still keeping meat and dairy producers from Belarus on a short leash. According to Deputy Prime Minister Uladzimir Dvornik, 60 Belarusian enterprises were under restrictions in late December. There were about 20 producers completely "banned". 11 months of undersupply of meat products from Belarus to Russia resulted in $155.6 million compared to 2018.

The decline in exports was caused by a decline in exports of goods in physical terms. Russian hostile activities have long become common practice in relations between the two countries. Therefore, the Belarusian government has set the task to compensate for losses on exports to Russia from other areas. The authorities bet on the so-called "far arc" countries. This group of countries unites states that are not members of the CIS and the EU. Officials' scenarios expect the share of these countries in foreign trade to increase to 33%.

The reality of 2019 showed that the Belarusian authorities' assessments were too optimistic. After 11 months, the share of the "far arc" in the trade turnover of Belarus was 18.2%. This is higher than in 2018 (16.6%), but still far from the stated 33%.

Moreover, trade with countries outside the CIS and the EU causes more negative effects to Belarus. Exports rose by 3.8% for 11 months, while imports by 11.1%. Due to the surge in imports, the negative balance with this group of countries has increased from 1.966 to 2.513 billion dollars.

It turns out that trade with the "far arc" not only fails to fill the hole in the trade with Russia (USD 7.292 billion for 11 months) but also expands it. In 2019, the export coverage in this direction fell to 65.1%. This means that exports make only $65 for every $100 of imports.

In autumn, the situation was deteriorating. In September, exports to non-CIS countries fell by 14.2%, in October - by 18.4%, in November - by 22.4%. Such a dramatic drop did not occur even when the Druzhba pipeline was clogged with contaminated oil from Russia. In September-November, Belarus missed $709.7 million of commodity exports outside the CIS. By 2018, imports from non-CIS countries raised by $372.3 million. As a result, the foreign trade balance declined by $1.082 billion over three months.

The main reasons exports decline were the undersupply of oil products and potash fertilizers. In 2018, Russia blocked re-export schemes with Ukraine, which forced the authorities to redistribute production in favour of the domestic market. The problems in the potash sector relate to the absence of a long-term contract for fertilizers supply to China.