Economy Ministry: 4 pillars to achieve USD 600 average salary in 2013

The Belarusian government has projected the average wage in the country at USD 600. However, a detailed analysis of the factors that potentially will make this projection a reality casts doubt whether this aim is achievable.

On September 20^th, at a briefing by Economy Minister Nikolai Snopkov on current issues of Belarus’ economic development he attempted to justify Lukashenko’s plans for the average salary at USD 600 in 2013.

Before the end of 2012, the Government plans to increase wages by 20.3%. January – July data shows that the growth in labour productivity lags behind the wages growth by almost twofold (5.1% productivity growth, 10.5% growth in real wages). Preliminary data shows downward trend in the labour productivity in the economy.

Evolutionary enterprises’ development is the basis for the productivity growth according to the Economy Minister.

1. Increased production capacities load. The focus is on the development of the production capacity in the processing industry. Major industries, generating the value added flows are chemical production and processing, which have little or no spare capacity. In 2012 refinery has been loaded up to 100% and fall in the potash production capacity is a consequence of the deteriorating situation in the foreign markets. Food production in Belarus after the Russia’s WTO accession may face increased competition and as a result, even the available spare capacity may be underused.

2. Increased number of new enterprises. It is anticipated that new enterprises will generate a new stream of value added and will redistribute the labor. Building of new enterprises per se, does not guarantee the achievement of the sales targets. Government’s justification concerning the reduced employment at existing enterprises also not guarantee that at the same time the existing production volumes at the existing facilities will be preserved.

3. Small and medium enterprises will generate 45-56 thousand new jobs. According to the National Statistics Committee, in 2009 – 2011 the average number of employees in SMEs decreased from 1243 thousand to 1223.3 thousand. The average wages in the SME sector are lower than the national average, which is associated with the tax optimization schemes widely used by businesses.

4. New programs in agriculture. A lion’s share of the agricultural production output is aiming for the Russian market. However, for the next year Russia meets its demand for poultry meat. Belarus has almost no access to alternative markets. Moreover, there are local conflicts in certain sectors, particularly in the dairy industry. There is no guaranteed market demand for new products.

Thus, all four factors are rather controversial, than guaranteed. Provided that Belarusian economy is focusing on one major market, the average wages at USD 600 depend more on the market demand by the largest trading partner, rather than the government’s efforts in this regard.