State aid unlikely to resolve problems with Belarusian economy

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September 18, 2017 10:58
Фото: Палата представителей Национального собрания Республики

Despite the overall economic recovery, some Belarusian industries continue to generate losses. Over the past ten years Belarus spent more than USD 2.5 billion on industrial modernisation, which boosted growth in production, but had no impact on its efficiency. High costs would prevent such industries from reporting profits by the year-end.

According to Belstat, as of August 1st, 2017, three industries reported losses. Namely, 34 woodworking enterprises of 121 with a total loss at BYN 118 million, which outpaced profits of other woodworking enterprises. Profitability of sales in the woodworking made some 0.8% and losses were attributed to due payments on modernisation loans. In addition, metallurgy and glass and cement plants were loss-making, too. Unprofitable enterprises took the lead in laying off workers across the country.

In previous years, the state invested more than EUR 1 billion in modernising the wood processing; more than USD 500 million in the key metallurgy enterprise, BMZ; some USD 1.2 billion in the cement industry, however they still require the state support. In 2016, BMZ reported over USD140 million in losses, all three cement plants were unprofitable, as well as most wood processing enterprises. That said, in 2017, exports in wood processing grew by 39%, in metallurgy by 30%, and at cement plants by 64% as compared with 2016. However, the growth in exports led to an increase in losses. High production costs are unlikely to enable these enterprises to report break-even production by the year-end, while reduced discount rate would be to no avail in repaying loans, since they were issued in foreign currency.

Overall, the growth in exports did not help metallurgy, woodworking and cement plants to report profits. The state would continue to provide state support for these industries, however it is unlikely to help overcoming losses in 2017.

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