Alexander Lukashenko presses for high growth rates

On March 12, Prime Minister Mikhail Myasnikovich reported to Alexander Lukashenko about the results of social and economic development of Belarus in January-February and provided with an outlook for 2012. According to Lukashenko, the economy is developing rapidly and positively, and that “those 5-6% of the GDP growth we have long argued about are feasible”.

Alexander Lukashenko assesses the results and prospects of the economic development based on financial indicators. He believes, since the inflation is under control and the foreign exchange market has stabilized, everything is working well and the economy could be “boosted”. This acceleration is traditionally carried out by money creation credits and state programmes. Meanwhile, the reduced inflation and stabilized Br exchange rate only prove that tight monetary policy is yielding results.

The average GDP growth in January-February was 3% (3.6% in January). Accordingly, Alexander Lukashenko wants to boost the economic growth to reach the desired 5%, but so that “not to create problems in the foreign exchange and financial markets”. However, the economic theory and experience of Belarus and the IMF prove it is impossible. It is either macroeconomic stabilization and slow growth, or inflation and artificially maintained high growth rates of the GDP. A large number of experts argue, one should agree with the recession in the economy, while maintaining macroeconomic stabilization, which will create healthy grounds for future growth. However, the economic authorities of the country disagree and intend to use the traditional means of economic policy.

Lukashenko also warned against the reduction of gold reserve and about the need to ensure a positive foreign trade balance, however he did not say what needs to be done. Regardless of slower growth rates (compared with projected) and existing various high-risks, Myasnikovich was confident all projected parameters will be met by the end of the first quarter and by the year-end. This confirms the dependent and formal nature of the government.