Belarusian exports hit the bottom

On October 31st, Belstat published the January – September 2013 foreign trade data.

Belarus’ foreign trade is highly dependent on a narrow range of exported goods. Export growth potential is insignificant. Although modernization has partially improved export opportunities, any positive effects have been offset by growing exports of equipment and ill-conceived business plans.

In September, the foreign trade in goods deficit was USD 484.5 million. The main reason for this was a decline in exports to USD 2.925 billion, the lowest level since February 2011. The decline in exports was due to the drop in Belarus’ main export items – petroleum products, potash fertilizers and machinery. Production of petroleum products directly depends on the volume of supplied raw materials for processing, and in the case of Belarusian-Russian conflicts, the latter exerts pressure by limiting the oil supply to Belarus. Exports of potash fertilizers have suffered after the breakup between Uralkali and Belaruskali and will not be improved because the market prices keep falling. Mechanical engineering is dependent on the Russian market: the drop in investment demand from major customers has resulted in a sharp drop in sales, which cannot be compensated by sales in other markets. Other export items are too insignificant to affect the overall picture.

For instance, Belarusian dairy products are in great demand on the Russian market in 2013. Dairy exports are constrained by the shortage of raw materials to produce milk powder, casein, and cheese. Sugar has high export growth potential due to poor harvest in Russia. In addition, Belarus has started producing Chinese cars – Geelly, with a clear orientation on the Russian market in the future. However, even if Belarus increases exports of these items and earns up to USD 200 million per month, this will not be enough to remedy the situation.

The industrial modernization was held to expand the range of export products and their exports on foreign markets. In some cases, it worked out: for example, with some Grodno Azot products or chipboard exports. However, these are rather exceptions than a rule. Most often, modernization has resulted in increased imports of production equipment and negative output.

Modernization in Belarus has failed to diversify exports. Belarus needs not only new technologies, but also new managerial approaches, which are not feasible in the current environment.