Budget 2013: an attempt to fulfill the impossible

Draft 2013 budget is based on inflated figures and the Belarusian economy will be unable to fulfill it without money printing. Departure from the tight monetary policy could provoke yet another loop of problems in the currency market, difficult to solve in the view of the foreign debt payments.

On November 3rd, 2012 the 2013 National Budget Law was published.

The initial parameters for the 2013 Budget forecast are unrealistic. GDP growth is projected at 108.5%. In January-September 2012 GDP growth was 2.5% with a downward trend. Businesses’ debts during the liquidity deficit period have increased significantly, which has suspended the core investment process.

The 2013 forecast for the export of goods and services growth – 115.2% of 2012 – seems unduly optimistic. Record high levels of exports in mid-2012 are unattainable in the near future, which is confirmed by the foreign trade statistics for January-September.

Consolidated budget for 2013 is balanced. Revenues and expenses are projected at BYR 197 trillion, which is 26.8% higher than the projection for 2012. The estimated inflation rate, 12%, implies a substantial increase in revenues will not be due to inflation, but at the expense of the real sector, which should significantly increase labour production in the absence of clear sources of funding for modernization.

As in previous years, substantial funding is envisaged for state agricultural programmes. In 2013, the amount budgeted for agriculture (more than BYR 15.5 trillion from the state budget and BYR 15.5 trillion from loans) will exceed BYR 31 trillion, or about USD 3.5-3.6 billion. Against the background of increased competition in the Russian agricultural market, refund risks are clearly underestimated, given the significance of the funds invested in the development of agricultural enterprises.

Thus, the Belarusian economy is faced with a choice. It will not be able to execute the projected budget without money printing. And the latter may result in a growing imbalance in the economy. The government is trying to focus on qualitative indicators, while the final decision will depend on the supreme authority.