Wages will grow and consumer imports restrictions will increase

On June 12^th, Minsk City Executive Committee Chairman announced the strengthening of the import substitution policy in retail sales.

Active growth in consumer imports is due to increased real economy wages. Against the background of common economic space formation, curbing the wages growth results in labour outflow to Russia. The government addresses the problem by restricting access to foreign-made goods to make Belarusians buy domestic consumer goods.

Nominal wage in April 2013 was BYR 4 888.3 thousand and increased by 50.3% compared with April 2012. Even with inflation adjustments wage growth is impressive – real wages have grown by 24.2%. Greater incomes resulted in consumer imports growth. According to the National Statistics Committee, in Q1 2013 consumer goods imports were USD 1 589.2 million, and increased by 33.6% or USD 399.3 million compared with Q1 2012. Retail trade statistics shows that consumer preferences shifted in favor of imported refrigerators, washing machines, televisions, imported alcohol and fruit. Domestic consumer goods do not satisfy all consumers’ preferences, especially in terms of the high-quality goods in middle and high price range.

The average monthly wage in April 2013 in Belarus was USD 565, in Kazakhstan – USD 698, in Russia – USD 920 (calculated by National banks’ exchange rates). Belarusian specialists do not Kazakhstan as an attractive labour market, but given the wage gap, Russian labor market is particularly attractive for various specialists. Labour outflow to Russia from Belarus indirectly could be assessed by using official data on wages’ wire transfers to Belarus. If in 2011 USD 240 million was transferred to Belarus, by late 2012 the figure was USD 286.9 million. Please note, that the official data do not reflect the full picture due to greater popularity of cash transfers.

Belarus faces the choice dilemma. On the one hand, Belarus needs to raise wages in order to prevent the labour outflow, but it cannot increase wages significantly, since the economy already cannot cope with current payments and further wage increases could speed up the devaluation. On the other hand, Belarus cannot effectively restrict imports, due to open borders with Russia and potential claims from partners in the Customs Union. Therefore the government will implement tacit restrictions when there are no formal restrictions, but indirectly various assortment lists are formed with a share of domestic goods; or either oral or written orders would be issued to increase domestic products’ assortment in retailers. In the future, the most likely measure would be the introduction of preferential consumer loans for the population, available for domestically made appliances only.

Thus, Belarus will use the 2009-2010 tactics, when wage growth was a necessary measure, and imports were restricted unofficially. In the short-term, the consumer imports growth situation will hardly be solved, due to the domestic industry limited capacity to meet the increased consumer demands.