Refusal of quarantine and growing credit exposure could not allow Belarusian economy to grow

In January-March 2020, Belarus; GDP amounted to 99.7% in comparable prices as against January-March 2019. Although Belarus' GDP gradually began to win back the January fall in February-March of this year, the index is nevertheless decreasing.

There are the main factors influenced the Belarusian economic decline in January-March 2020:

- reduced Russian oil supplies;

- lack of compensation for Belarus due to tax maneuver in Russia;

- lack of a new contract for the supply of potash fertilizers with China;

- reduced Belarusian gold and foreign exchange reserves

- weakening of the Belarusian ruble exchange rate;

- increased consumer crediting of the population;

- difficulties with attraction of new currency loans and credits;

- increased stocks;

- increased rates on new credits in rubles and currency;

- increased economic entities' borrowings in rubles and decreased borrowings in currency.

The Belarusian economy declined due to the problems in the petrochemical branch, wholesale trade, transportation, and the housing and public utility sector.

When the Russian suppliers reduced the oil supplies, the Belarusian refineries decreased the output and the industrial production index in the oil refining branch to 58.0%. The lack of new contracts for the supply of potash fertilizers with China reduced the chemical production index to 83.7%.

The warm weather in January-March of this year had a double effect on Belarus' GDP. On the one hand, the warm winter led to a decrease in the GVA index of electricity, gas, steam, hot water, and air conditioning supply. On the other hand, the warm weather helped the growth rates in the construction and agriculture accelerate.

Information and communication made a positive contribution to the GDP growth in January-February, too.

Note that the last year's low base had a positive impact on growth in construction and agriculture.

The reduction in foreign trade turnover in the petrochemical sector led to a decrease in budget revenues, and preparations for the election increased the costs. As a result, the surplus of the Republican budget in January-March of this year compared to last year decreased by almost 4 times.

In April of this year compared to April 2019, the consumer price index accelerated by 0.6 percentage points by all items. At the same time, the main growth was provided by food products (by 1.1 percentage points). In April compared to March, the index of prices and tariffs for services reduced by 0.3 percentage points thanks to the lowered tariffs in passenger transportation and services related to the exchange rate of foreign exchanges.

The increase in ruble indebtedness is explained by the significant weakening of Belarusian ruble amid a slight increase in interest rates. The growth in ruble indebtedness was also facilitated by the weakening of the requirements of the National Bank when credits were issued. The requirements for the creation of credit reserves were reduced, the requirements for the adequacy of currency revenues to repay currency credits and others were reduced. Note that in March the state support for woodworking resumed after a break in January-February.

In the structure of changes in debt to state banks and private banks for January-March of this year, the main growth in ruble and currency debt was still provided by private banks. Moreover, the share of individuals in the growth in debt to banks in rubles in January-March of this year amounted to almost 44%. In the growth in individuals' debt to banks in rubles, the share of consumer credits was almost 2 times more than the share of housing construction credits.

As in the previous years, the wages and the retail turnover grew in March. The difference was a significant growth in consumer lending caused by the weakening of Belarusian ruble and, as a result, the growing demand for non-food products that increased the retail turnover.

Gold and foreign exchange reserves remain the only source of currency in the country because instead of the planned attraction of USD 2 billion in January-April the government managed to raise less than USD 190 million in the domestic market and place about USD 130 million worth of government bonds in the Russian market. Although the payments of government bonds amount to about USD 500 million in the next two months, the payments will exceed USD 1 billion in the summer. Taking into account the pre-election period, this means that the risks of further devaluation remain high.

Main macroeconomic indicators

Indicator

February2020

March 2020

January-February2020

January-March2020

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

100.7

100.3

99.4

99.7

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

8,670.4

9,444.3

17,187.6

26,663.0

3. Industrial production index, in % of the appropriate period of the previous year

99.2

98.5

96.7

97.3

4. Retail turnover, BYN million (in current prices)

3,897.6

4,661.5

7,802.3

12,463.8

5. Retail turnover index, in % of the appropriate period of the previous year

108.8

110.5

106.4

107.9

6. Capital investment, BYN million (in current prices)

1,794.4

2,566.6

3,319.5

5,886.1

7. Capital investment index, in % of the appropriate period of the previous year

104.3

109.2

100.9

104.5

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

101.0

100.9

-

-

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

-

-

101.9

102.7

10. Price index of manufacturers of industrial products, in % of the previous month

100.7

100.9

-

-

11. Price index of manufacturers of industrial products as against December of the previous year on an accrual basis, in %

-

-

101.4

102.3

12. Balance of foreign trade in goods

(specified data)

(preliminary data)

Exports of goods, USD million

2,224.2

2,360.3

4,276.0

6,636.3

Imports of goods, USD million

2,558.3

2,907.7

4,752.7

7,660.4

Balance, USD million

-334.1

-547.4

-476.7

-1,024.1

See the detailed economic analysis for March-April 2020 and the short-term forecast in the review "Economy of Belarus for March-April 2020" prepared by the research company InComeIn.



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