Belarus Business Forecast Report Q1 2015

Date: December 12, 2014
Pages: 36
US$ 1,195.00
Report type: Strategic Report
Delivery: E-mail Delivery (PDF), Download

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Core Views

The ongoing crisis in Ukraine will ensure support for President Alexander Lukashenko remains robust in the run up to the 2015 presidential election. Opinion polls indicate voters prefer the stability engendered by the regime to the uncertainty following the ousting of the president, and we believe the government will continue to divide its focus between closer Russian and EU relations.

The Belarusian economy will receive a boost over the remainder of 2014 and into 2015 as agricultural exports to Russia increase in the wake of the Kremlin’s ban on Western food imports. Nevertheless, the damage done to the Russian economy by the tit-for-tat sanctions will feed through into declining investment into Belarus and a fall in export demand beyond the initial one-year timeframe for the import ban.

Consumer price inflation in Belarus will remain elevated in the quarters ahead as Russia’s ban on the import of foodstuffs from the EU and other Western states results in higher export volumes to Russia, but a constriction in domestic supply.

Major Forecast Changes

In light of the close economic and political relationship between Belarus and Russia, geographic proximity and already entrenched agricultural bilateral trade links, we believe exports to Russia (Belarus’ largest export market) will increase over 2015. As a result we have revised up our real GDP growth forecast for 2014 from 0.9% to 1.0% (still well below the optimistic 2.0% target set by President Alexander Lukashenko), but we hold to our forecast of 1.5% in 2016.
Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook


SWOT Analysis
BMI Political Risk Index
Domestic Politics
Little Threat To Regime Stability
Belarus will remain on a stable political trajectory in the run-up to presidential elections in November 2015, as the state continues to prevent the formation of any coherent opposition movements. The ongoing crisis in Ukraine will also bolster support for the incumbent, as Belarusians prioritise national stability over democratisation.
  Table: Political Overview
Long-Term Political Outlook
Focus Remains On Russia
Belarus' long-term political stability is jeopardised as a result of the country's lack of institutional development beyond the executive branch. Consequently, while our core scenario is for President Alexander Lukashenko's regime to maintain its grip on power over the long term, we do not rule out the possibility of growing public dissatisfaction resulting in a sudden change of leadership or direction. The most likely spark for any public unrest is the November 2015 presidential election, with large protests erupting following the 2010 poll. We believe the country's greatest challenge over the coming decade will stem from the regime's efforts to diversify its foreign policy agenda while maintaining strong links with Russia.


SWOT Analysis
BMI Economic Risk Index
Economic Activity
Flagging Competitiveness To Cap Growth
Belarus’ over-valued currency and unsustainable wage growth will continue to harm its international competitiveness over the coming years. In addition, the government's huge footprint in the economy and the country's narrow industrial base will ensure that fixed investment in Belarus remains weak.
  Table: GDP Contribution To Growth
Balance Of Payments
No Escape From C/A Deficit
Belarus' current account deficit will remain a key risk to macro stability over the coming years as an overvalued currency fuels imports and hurts competitiveness. Low FX reserves and an almost complete reliance on Russian finance will increase the country's external vulnerability.
  Table: Current Account
Fiscal Policy
Budget Deficit To Widen
Belarus will post widening fiscal deficits over the coming years, as the government struggles to curb public sector wage growth and push ahead with the privatisation of state-owned companies. Nevertheless, continued support from Russia will prevent a significant deterioration in Belarus' fiscal accounts.
  Table: Fiscal Policy
Monetary Policy
High Inflation Here To Stay
Inflation will remain extremely high in Belarus over the coming quarters as the government chooses to keep interest rates relatively low to support economic activity. In addition, both rapid wage growth and increased Russian demand for Belarusian food products will continue to drive up domestic prices.
  Table: Monetary Policy


The Belarusian Economy To 2023
Economy Faces Tough Years Ahead
We remain downbeat on Belarus' long-term growth potential on the back of the large footprint of the state on the economy, which will stifle productivity and deter private fixed investment. We do, however, expect the country to pursue a modest degree of political liberalisation, although we caution that meaningful democratisation is unlikely and that Moscow will remain Minsk's principal benefactor.
  Table: Long-Term Macroeconomic Forecasts


Operational Risk Index
Operational Risk
  Table: Operational Risk
Transport Network
  Table: Transport Network Risks
Economic Openness
  Table: Economic Openness
tabl e: Top Five Products Exp ort ed, (USDmn )
tabl e: Top Five Trad e Partn ers – Product Imp orts , (USDmn )


Global Outlook
Warning Signs Growing
  Table: Global Assumptions
  Table: Developed States, Real GDP GrowtH, %
  Table: Emerging Markets, Real GDP Growth, %
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