Alexander Lukashenko ignores the lessons of the past and orders high growth rates in 2012

The government has been forced to plan high growth rates in 2012 and to forget about the plans to stabilize the currency market. In 2012 the economy will be funded by emission once again. The lack of a new stabilization loan will set new tasks and challenges for the government and the National Bank.

Alexander Lukashenko tasked the government to achieve 5-5.5% of the GDP growth in 2012. Lukashenko said, “For those who do not agree or unable to fulfill this task we shall find another job. However after I sign this document, everyone should run around the country and say that it is possible, it is good, let’s start mobilization. Don’t you dare to talk to the media! God forbid I receive the opposite reports!” The new plan, envisaging 5.5% of the GDP growth, controlled prices and wages increases should be ready by mid-December.

Mr. Lukashenko has ignored the views and concerns of Deputy Prime Minister Rumas and his supporters in the government regarding the possible negative consequences for the economy (inflation, devaluation) with the GDP growth higher than 1-1.5%. In 2012 the economy will be funded by money emission once again.

De jure the parameters of the annual economic growth have not yet been approved, however one of the consequences of their announcement by the Government could be that the IMF Mission anticipated to visit Belarus on 12-16 December, will not come. The orders of the head of state imply that the economic policy of the country will resume stimulation of growth via emission.

The lack of a new stabilization loan will set new tasks and challenges for the government and the National Bank and it is unclear how they will be addressed, given the IMF loan in fact has already been incorporated into the basic development plan. Moreover, this amount significantly exceeds the amount of benefits to be received from the reduced gas price.

Also, wishful thinking of Lukashenka conflicts with the main priorities of the NBB monetary policy. In order to achieve 5% growth of the GDP the NBB will be forced to issue emission credits and to review its monetary policy priorities.