Lucanomics Is Going Down

Business representatives and investors delivered their verdict.

During the first quarter, the economy of Belarus "grew" a little, but experts do not see any serious reasons for optimism. The internal environment is not conducive to sustainable economic growth, and foreign observers predict a gloomy future for our country, write naviny.online.

Gloomy prospects

In the first quarter, the main macroeconomic indicator - gross domestic product - grew by 0.9% compared to the same period last year. By the way, in the first quarter of last year, GDP fell by 0.3% against the backdrop of undersupply of Russian oil and a reduction in exports of petroleum products and potash fertilizers.

This year Belarus is not experiencing problems with oil imports, and the world potash fertilizer market is growing. Therefore, the export of petroleum products and potash fertilizers is increasing. As a result, against the background of the last year's low base, a slight recovery economic growth was recorded.

However, this does not inspire anyone. Lenders assume that Belarus will experience low economic growth at best (if the country does not face new shocks).

Experts from the Joint Vienna Institute generally agree with this forecast. It was created in the 1990s by the Ministry of Finance and the Central Bank of Austria, together with the International Monetary Fund and several other international organizations, to train mainly government officials from Central, Eastern, and South-Eastern Europe, the Caucasus, and Central Asia.

The April forecast prepared by the experts of the Joint Vienna Institute emphasizes that “Belarus is going through a period of political and economic turmoil.”

And although the experts of the Joint Vienna Institute expect a small (within 1.5%) recovery growth of the Belarusian economy this year, on the whole, their expectations are negative.

“Russia remains the only source of external financing for Belarus, new lending may be due to tough political concessions. Given the growing financial constraints and deep-rooted structural problems, the economic outlook for Belarus is rather bleak,” analysts from the United Vienna Institute predict.

At the end of last year, Belarusian economists decided to ask business representatives how certain measures of state policy could affect the economic situation in the country. To do this, we included the relevant questions in a survey conducted by the IPM Research Center and MIA Research. The survey involved 211 business representatives.

The entrepreneurs highlighted several key points. In their opinion, lowering taxes and simplifying their administration, coupled with an end to the persecution of citizens for political views, would greatly improve the economic situation in the country.

But the measures that have recently been heard in Belarus (printing money to support the public sector; tight price regulation; creation of large holdings based on state-owned enterprises) can aggravate the economic situation, business representatives believe.

Assessment of the Potential Impact of Certain State Policy Measures on the Economic Situation in Belarus

There are many risks

Fears that the economic situation may not develop in the best way give rise to negative expectations in the economy.

Since October last year, the IPM Research Center has been regularly conducting surveys of the customers of the IPM Business School (from 65 to 125 top managers and company owners are surveyed monthly). The average assessment of the level of risks on a five-point scale is 4.5 points. Half of the interviewed businessmen indicated that they consider the risks for their activities high, the other half - very high.

The main barriers identified by entrepreneurs are high uncertainty, instability of the macroeconomic environment, mistrust of the legal environment, and low demand for their products. In March, administrative regulation of prices was added to the number of barriers that businesses began to call significant in the course of surveys.

The risks and barriers that entrepreneurs see create negative expectations. In order for such expectations to decrease, the authorities need to reduce the level of economic uncertainty and socio-political tension within the country, says Aliaksandr Chubryk, director of the IPM Research Center.

In conditions when there is no such confidence and the economic and political situation remains difficult, Belarusian companies do not make long-term plans, at most - for a quarter.

“Long-term investments in such an environment are very rare,” Chubryk stressed, commenting on the results of a business survey.

While the economic prospects for Belarus are really rather gloomy, Vadzim Iasub, a senior analyst at Alpari Eurasia, agrees with the forecast of the Joint Vienna Institute and the opinion of other economists.

"The only bright ray in the gloomy future that the country may have is connected with the efforts of the National Bank. The Central Bank, despite the negative political and economic events, tries to ensure financial and price stability in the country," Iasub emphasizes.

The intensification of economic problems stems from political tension, and, as long as this factor continues to operate, high risks for the economy will remain, the expert said.

“Due to the current situation, the expectations of economic agents (enterprises and population) have worsened, Belarus's access to international financial markets has become difficult, and the country has found itself under sanctions. The best thing that can be expected in the future, if the current political situation persists, is relative financial stability, if the National Bank manages to maintain it," Iasub concluded.