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December 19 – December 25, 2011

Trade balance slipped back to negative values

The situation has not changed
Trade balance slipped back to negative values

In October 2011 the negative trade balance reached $ 151.7 million, while during the previous 3 months the trade balance was positive. As a result, the trade balance could decrease to the level of 2010. It is the best illustration of the problems of the Belarusian economy and of the inability to improve its competitiveness artificially.

In January-October 2011 foreign trade deficit in goods and services was negative and amounted to USD 2075 million. In October it was negative and amounted to USD 151.7 million, and during the previous 3 months, it had a positive value.

Regardless of almost three-fold devaluation, there is a significant shortfall in Belarus, which needs to be financed either by external borrowing or by the sale of state property. The negative value of the foreign trade balance is mainly due to export-import operations with intermediate products (energy, raw materials and components). The balance of foreign trade in energy was negative, amounting to USD 3 471.2 million, against USD 4116 million in January-October 2010. However, by the end of the year the negative trade balance could reach the level of 2010 (including arrears for gas payments for the third quarter of 2011 of $ 200 million and increased gas prices, as well as slowdown of export growth). It is the best illustration of the problems of the Belarusian economy and of the inability to improve its competitiveness artificially, even though in the medium term. With the strengthening of the Belarusian ruble the effect of the devaluation and its positive impact on export will evaporate completely.

Therefore in 2012 the authorities will once again face the dilemma of: either to sell the gold reserves to support the exchange rate of Br or to devalue the national currency once more. Strong ruble coupled with a loose monetary policy and increasing salaries (the government is forced to raise salaries, as the recession and the subsequent labor migration to Russia becomes a real threat) will once again boost imports and decrease exports.

In the meanwhile, the new forecast of socio-economic development pan by the Government implies the GDP growth at 5% due to exports only. Bearing in mind all of the above, it is clear that the 5% GDP growth has been put there at the request of Alexander Lukashenko. The real economic situation will be much worse: the economy will accumulate old economic problems, which can only be solved by real economic liberalization and privatization.

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