About 50% of Belarusians to be able to live on their savings for at most two months

An example of many countries struggling with the coronavirus epidemic shows that the introduction of quarantine can not only stop the spread of the epidemic but also prevent serious economic consequences for the country and the population. The likelihood that enterprises in Belarus will not be able to partially or fully carry out their activities due to the coronavirus epidemic only increases.

Now, upon detection of the COVID-19 virus, not only the patient but also the entire team is isolated; the institution or enterprise is closed at least for 14 days. In the absence of official quarantine, employees stay home at their own expense. If the spread of the disease increases, such necessary shutdowns of enterprises will occur everywhere and continue for a long time. In addition to the fact that people and companies in this situation remain without support, economic activity is slowing down as a whole. Demand is falling, and chains are breaking. Against this background, operating enterprises are also cutting back on activities, as a result of which part of the workers is transferred to part-time work or even go on unpaid leave.

Therefore, analysts at BUSINESS NEWS decided to evaluate the circle of people, the inevitable reduction in whose income could transfer them into a low-income group of population.

In 2019, the cash income of the population of Belarus increased by 6% in comparable prices and by 12.2% in absolute terms compared to 2018. At the same time, the largest growth was observed in property income and transfers to the population, while the smallest growth was observed in business income and other income. The main income item – labor remuneration – grew by almost 12%.

BYN million

в % к итогу

Cash income in 2019

81,639.9

100.0

including:

labor remuneration

52,400.2

64.2

business income and income from other activities bringing income

6,394.1

7.8

transfers to the population (pensions, benefits, scholarships and other transfers to the population)

19,016.1

23.3

property income (deposit interests, dividends and other property income)

1,885.0

2.3

other income

1,944.5

2.4

Source: National Statistical Committee

In spite of the increased income, the shares of risk groups did not change much. Almost half of the population has per capita disposable income of up to BYN 460 or 2 minimum subsistence budgets (minimum subsistence budget amounted to BYN 231.83 at the end of 2019). This means that if the quarantine is introduced for several months, these people will quickly face problems on how to provide themselves and their families with the minimum subsistence budget.

Only 22% of the population has an income of more than BYN 700 (more than 3 minimum subsistence budgets) and may not be very worried about the quarantine.

The share of the population by the ratio of per capita disposable resources to the minimum subsistence budget,%

2019

2018

under 50.0

under BYN 116

0.1

0.2

50.1 – 100.0

BYN 116 – 232

4.9

5.4

100.1 – 200.0

BYN 232 – 464

40.3

42.8

200.1 – 300.0

BYN 464 – 695

32.3

31.2

above 300.0

above BYN 695

22.4

20.4

Source: National Statistical Committee

The families with children are the main risk group. According to the data for 2018, the share of the population of this group with the per capita income of less than BYN 450 is 66.4%, while the families with two and more children amounted to 78.8%.

The households without children, especially those including one person, are the group with the lowest risk. Note a relatively stable structure of households of pensioners, primarily thanks to the absence of children.

There is also a more favorable situation in cities compared to the village: under BYN 450 – 46.2% and 55.0% and more than BYN 700 – 21.4% and 12.5%.

According to the National Statistical Committee, the nominal accrued average monthly wages of employees of organizations amounted to BYN 1,090.9 in 2019. At the same time, the nominal accrued average monthly wages at state-financed organizations totaled BYN 844.5 in 2019.

According to the National Statistical Committee, the number of people employed in healthcare and social services, education and public administration is almost a million people. That is, at least one of the parents works in the public sector in almost every third household in Belarus.

Deposits can render some support to the population during the crisis. According to the National Bank, the volume of deposits amounted to BYN 5.24 billion and USD 6.31 billion as of January 1, 2020 (BYN 13.3 billion in the equivalent). They include BYN 4.74 billion worth of revocable deposits (in the equivalent) and BYN 13.77 billion worth of irrevocable deposits (in the equivalent).

The average deposit equaled to BYN 5.15 thousand in rubles and USD 6.97 thousand in currency. That is, the number of ruble depositors is more than 1 million people. The number of currency depositors is more than 900 thousand people. That is, every fifth individual has deposits at the best case. Most likely, this number is even less because many people have both ruble and currency accounts.

Note that the average deposit is almost 5 average wages in rubles and more than 12 monthly wages in currency. Moreover, to save up BYN 5 thousand, it will take more than 3.5 years if one saves BYN 100 per month at the rate of 12% per annum. To save up USD 7 thousand, it will take almost 10 years if one saves USD 50 per month at the rate of 1.5% per annum.

Taking into account the low per capita incomes of the most part of the population, it is most likely that a significant volume of deposits belongs to that 22 % of the population with the income of more than 3 minimum subsistence budgets (BYN 700).

This means that the main part of the population will find the available deposits enough for one or two months to maintain the minimum subsistence level. For example, the deposit amounting to BYN 2,000 corresponds to the income of the family consisting of four persons with an average per capita income of 2 minimum subsistence budgets (BYN 465).

A certain risk is a low share of state-owned banks (25%) in the volume of currency deposits on demand because small commercial banks may face a shortage of currency in the event of a significant outflow of deposits.

The credit payments constitute a significant part of the expenses of the population. According to the National Bank, the volume of consumer credits amounted to almost BYN 5.5 billion and the volume of real estate credits totaled more than BYN 8.5 billion as of January 1, 2020. The average rate on all credits excluding the preferential ones was almost 13% per annum. It was 9.2% per annum taking into account the preferential credits. A significant part of housing credits was issued on preferential terms.

Taking into account the fact that the average term of consumer credits is about 2 years, one will spend BYN 3.5 billion per year to repay them (with interest). Add about BYN 1.5 billion worth of real estate credit payments to this sum.

Moreover, the main burden of credit payments lies on the low-income groups of the population.

In terms of the average per capita income of people with incomes of up to 3 minimum subsistence budgets (about 75% of the population), this amounts to about BYN 700 per year or almost BYN 60 per month. It is almost BYN 250 per month for the family with 2 children. It is no coincidence that the National Bank has already recommended the banks to consider the possibility to grant citizens a delay in paying off loans and paying interest, and at the same time to extend the credit repayment terms (if there are documents confirming the problems).

Taking into account the fact that the share of state-owned banks accounts for almost 90% of real estate credits, there should not be any special problems since state-owned banks fully observe the recommendations of the National Bank. If the situation worsens, the state will support them. The problem may cover the consumer credits, where the share of state-owned banks is less than 30%.

Foreign remittances are another item of personal income. In 2019, their volume amounted to more than USD 1 billion. Taking into account the decline in the global economy, especially in Europe, the USA, and Russia, this income item will reduce.

Summing up, it can be said that if a forced decision is made to stop enterprises and send employees on social leave, both paid and unpaid, up to 50% of the population may face problems to maintain the minimum standard of living in two months.

The families with 2 or more children who have credits are at risk. Relatively small savings of this group of the population can help only for one or two months.

Another risk group will be the families where at least one parent works at the industrial enterprises, which, will have to send their employees on leave with reduced wages due to decreased output and exports.

The third group of the population that may face a temporary ban on their activities will be individual entrepreneurs working in the markets and self-employed people.

Refusal from the official introduction of the quarantine with its guarantees and reliance on the targeted relief of the situation in the event of the disease detection means that market participants can rely only on themselves. If the state tries to save the wages of the employees working in the real sector, even with the help of the printing press, the problems of enterprises and individual entrepreneurs will become a headache for the owners and heads of these structures even if the state is their owner. In this case, the method of reducing the working week and transferring part of the employees to unpaid leave will most likely be used.

Taking into account the fact that almost 50% of the population falls into the group with per capita incomes of up to 2 minimum subsistence budgets, the maximum term of the shutdown of enterprises should not exceed 2 months. Otherwise, the state should compensate the population for losses from a forced interruption of work and professional activity. First of all, it is referred to high-risk groups.

If the income of half of the population with lower incomes decreases even by 1 minimum subsistence budget, the consumption will go down by BYN 1 billion, which is about 25% of the volume of retail trade per month. The banks will lose about BYN 400 million due to the credit holidays. It is required to increase the ruble money supply by 6.5% only to compensate for these losses, which will inevitably affect the Belarusian ruble exchange rate.

When estimating the losses of the economy, the shutdown of enterprises engaged in light industry, mining, chemical industry, woodworking, metallurgy, instrument making, and machine building will reduce the monthly industrial production by BYN 2 billion or 25%. The monthly GDP losses in industry, construction, and trade will be about 12%.

Accordingly, if the economic situation worsens and enterprises are shutdown, more than half of the population will not be able to provide themselves even with the minimum subsistence income in two months.



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