Belarus: In 2020, growth is demonstrated only by the service sector, focused on the domestic market, and the IT sector

In January-September 2020, the GDP of Belarus amounted to BYN 106.6 billion, or in comparable prices 98.7% over the same period in 2019. In addition to the coronavirus epidemic and two currency crises, the main impact on the economic decline was made by the decrease in turnover in the petrochemistry and mechanical engineering.

Note that the difference between the GDP deflator index and the consumer price index has sharply increased since June of this year. Most likely, these statistical manipulations explain the lower rate of decline in the GDP index in summer than in spring.

In addition to the reduction in Russian oil supplies, the main factors that influenced the Belarusian economy in January-September 2020 were:

- reduction of the volume of aid from Russia;

- decrease in prices for potash fertilizers under new contracts with China and India;

- decline in industrial production;

- decrease in warehouse stocks since June;

- reduction of freight turnover by pipeline and rail transport;

- deficit of the republican budget due to rising costs and falling revenues;

- growth in demand for currency;

- an increase in the gap between the rates on new loans in rubles and the refinancing rate;

- currency crises in March and August, and the resulting outflow of population’s deposits in foreign currency and rubles;

- growth of borrowing by business entities in rubles, and on favorable terms, against the background of uncertainty with the exchange rate of the Belarusian ruble;

- difficulties in attracting new loans and credits in foreign currency.

As expected, after GDP growth in August due to a good harvest, the GDP index began to decline in September this year. The largest contribution to the decline in the economy of Belarus in January-September was made by transport, industry and wholesale.

Note that this year only the service sector demonstrates growth, mainly due to internal incentives and focus on the domestic market. The exception is the IT sector, thanks to which the foreign trade balance in January-September increased and amounted to USD 1.5 billion. But due to the post-election crisis and the beginning of the relocation of IT firms abroad, the volume of export earnings began to decrease.

Despite the refusal of Belarus from quarantine, in January-September this year, the industry showed a decline. Growth was noted only in woodworking, food production and pharmaceuticals. However, in many respects it is caused by lending, and on favorable terms. In January-September, the industrial production index amounted to 98.2% over the same period last year. It should be noted that the decline in industrial production led to a reduction in freight turnover in transport to 93.3% and turnover reduction in wholesale trade to 92.6%.

In January-September, the revenues of the republican budget decreased by BYN 1.45 billion. The reason was the drop in industrial production and foreign trade turnover. At the same time, expenditures for this period increased by BYN 3.15 billion – of which BYN 2.6 billion was financing of nationwide activities, which includes inter-budget transfers to regions, and payments on the state debt, which increased due to the weakening of the Belarusian ruble. As a result, the republican budget deficit amounted to BYN 1.85 billion.

The weakening of the Belarusian ruble in August-September accelerated inflation, which in January-September this year amounted to 4.7%, exceeding the indicators of previous years. Moreover, in September, the main growth in the consumer price index was made by non-food products, the growth of prices for which amounted to 2.0%.

After a record August growth in the volume of debt of business entities, in September there was a correction, the volume of debt slightly decreased. However, the growth of concessional lending continued: the difference between the rates on new loans, taking into account concessional ones and excluding them, almost doubled.

Due to the persistence of instability at the foreign exchange market and problems with foreign exchange liquidity, the decrease in foreign currency debt continued in September.

To curb the demand for foreign currency, the National Bank maintains the high cost of ruble resources at 15%. As a result, interest rates on credit resources, including consumer loans, increased, which reduced the amount of debt on them.

Due to a decrease in the volume of Belarusian rubles at the market and an increase in rates on ruble resources, it was possible to increase the supply of foreign currency at the domestic market. But due to the artificially supported exchange rate of the Belarusian ruble against the Russian one, in order to provide favorable conditions for the export of Belarusian goods to the Russian market, and the high volatility of the Russian ruble against the dollar, high volatility against the dollar and the Belarusian ruble remains.

And although the net sale of foreign currency has remained for the second month, in October this was due to the payment of quarterly taxes. Therefore, against the background of continued demand for foreign currency due to the prolongation of the current crisis, in the absence of external financing, the gold reserves of Belarus will continue to decline.

Key macroeconomic indicators

Denomination of indicator

August 2020

September 2020

January-August 2020

January- September 2020

1. Gross domestic product, in % to the corresponding period of the previous year





2. Industrial production, BYN million (in current prices)

10, 072.3

10, 288.2

72, 797.6

83, 092.3

3. Index of industrial production, in % to the corresponding period of the previous year





4. Retail turnover million BYN (in current prices)

4, 715.6

4, 374.5

34, 510.3

38, 884.8

5. Index of retail turnover, in% to the corresponding period of the previous year





6. Investments in fixed capital, BYN million (in current prices)

2, 296.9

2, 919.4

17, 539.,8

20, 459.3

7. Index of investments in fixed capital, in% to the corresponding period of the previous year





8. Consumer price index, in % to the previous month





9. Consumer price index versus December of the previous year on an accrual basis, in %





10. Producer price index for industrial products, in % to the previous month





11. Industrial producer price index versus December of the previous year, on an accrual basis, in %





12. Commodities foreign trade balance

(updated data)

(preliminary data)

Export of commodities, USD million

2, 580.6

2, 691.0

17, 925.7

20, 616.7

Import of commodities, USD million

2, 691.3

2, 836.7

20, 243.1

23, 079.8

Balance, USD million



-2, 317.4

-2, 463.1


On November 3, the US presidential election was held. And although the official election results have not yet been announced, it is already clear that the non-systemic player Trump will not be president. It also means that the world economy has taken another step towards building a global model. And in the next 4 years, the United States will shift its focus from domestic policy to external world issues.

Thus, Europe is counting on greater consideration of its interests (construction of Nord Stream 2), and China - on mitigation in the trade war (sanctions in the technology sector).

At the same time, Relations of the US with Russia, as well as with Belarus, are likely to face worsening and tightening of sanctions rhetoric. Moreover, Russia may quit from the OPEC + agreement, since the last compromise was reached with the direct participation of Trump.

But these are all prospects, rather, for the next year. In the meantime, the Brexit failure is becoming more and more obvious, since the parties cannot resolve several fundamental issues. The conflict between the EU and Turkey has been temporarily postponed, but a wave of terrorist attacks galloped across Europe due to the aggravation of interfaith relations. Protests from small businesses against new quarantine measures are intensifying.

The economies of the leading countries reported recovering in Q3 after the failure in Q2. But, as it turned out, the recovery was temporary. It is already clear that the second wave of coronavirus is much stronger than the first one. The main hit, as in the spring, will be handled by the service sector, as restrictions are again imposed on its work. Accordingly, everyone is preparing for the next economic decline, both in the IV quarter and at the end of 2020 as a whole.

According to the IMF estimate, by the end of this year, the planet's economy will “undershoot” USD 11 trillion. And in 2021, on average, developed countries will be credited up to 125% of their GDP. Emerging market countries - up to 65%, others - up to 50%. The only large economy that will show growth by the end of the year will be the Chinese one. According to IMF estimates, its growth will be 1.9%. All others will show a drop of about 7%.

Realizing that the next emission injections can only temporarily support the economy, the leading central banks under the auspices of the IMF are discussing reformatting the current Bretton Woods system.

Under the guise of the coronavirus crisis and changes in the global climate, it is proposed to systematize the provision of loans to all those in need. For this, all countries will have to agree to create a new loan servicing monitoring system based on the G20 group.

At the same time, the project participants will have to transfer their free capital to investment trusts, which will become new creditors under the general management of the IMF. The low profitability of such investments is specially stipulated in order to stimulate economic growth.

As a result, those who control the IMF will gain control over investment projects. It is no accident that Russia and China, unlike Europe, are in no hurry to congratulate Biden on his election victory.

Against the background of Biden's victory and the rise in oil prices, a correction took place in the foreign exchange markets of emerging economies, including the Russian market. In addition, a solution to the conflict over Nagorno-Karabakh has emerged. Therefore, for a while, external pressure on Russia will ease.

At the same time, in Russia, problems are growing for small and medium-sized businesses, which, having not resolved issues with debts due to the first wave of coronavirus, are already facing new problems due to the second wave.

The improvement of the situation at the foreign exchange market in Belarus should not be misleading. It was achieved due to the administrative resource in the form of a severe shortage of ruble liquidity. This measure does not solve systemic problems, but only worsens the situation in the financial and real sectors of the economy. The cost of ruble resources remains high, domestic foreign currency financing is limited by low liquidity, and foreign financing is limited by a Russian loan of USD 1.5 billion, which is also linked to the reform of the Belarusian model. An attempt to launch the "printing press" will lead to a weakening of the national currency and a new crisis at the foreign exchange market.

The post-election crisis in the society from open protests goes deep into the economic and political system. There has already been a tendency towards a decrease in foreign currency earnings due to the relocation of a part of the IT sector, which has been the driver of the Belarusian economy for the past several years. At the leading enterprises, the strike movement is intensifying, which negatively affects production.

The country current leadership’s inability to negotiate and the lack of readiness for real changes, as well as the unwillingness of the Russian leadership to continue subsidizing the economy of Belarus, make it a problem to receive even limited assistance. In addition, negotiations are ahead on oil and gas prices for the next year, which will be tightly linked to progress in integration projects. The Kremlin made it clear that there will be no funding for the Belarusian multi-vector approach.

The country leadership’s attempts to return dialogue with Western partners are also crashed against closed doors. There will be no reboot in this direction. Moreover, as we have already said, the sanctions rhetoric will be tightened, and additional restrictions on government officials and related businesses are not excluded.

Internal repression of the private sector and the announced tightening of business in Belarus will increase relocation and capital outflow.

That is why improvements in the Belarusian economy should not be expected. Moreover, even maintaining the current relatively low rates of GDP index decline, not to mention growth, is possible only through manipulation of macroeconomic indicators.

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