March 2 – March 8, 2015

Wage-cuts have not fully solved economic stability problems in Belarus

The situation has not changed
Wage-cuts have not fully solved economic stability problems in Belarus

The average monthly salary in Belarus has reduced to USD 400. In 2015, the authorities changed their usual strategy of sharp pay-rises to the population before the elections. Wage cuts have somewhat improved economic stability in the country, however full stabilisation is only possible when Belarus makes all due public debt payments for 2015.

According to the National Statistics Committee, in January 2015 the average salary in Belarus was BYR 6 million. Thanks to the devaluation, this amount is equivalent to USD 400 (average wage in April 2012). In most regions of Belarus, average wages do not exceed USD 350. Monthly wages were the highest in July 2014 – USD 625.

Despite the pre-election period, wages in 2015 will not grow. Apparently, the authorities have learned their lesson from the past devaluations. Wages only grow in some industries amid lay-offs. For instance, in 2014, the largest industrial enterprises – MAZ, BelAZ, Atlant, MTZ laid off up to 10% of their workers. The outflow of specialists to Russia has declined due to sharp wage-cuts in Russia (USD 500 per month in January 2015). In addition, the labour market is under pressure because of migrants and refugees from Ukraine, leading to lower requirements by potential employees and increased number of applicants for a job.

High wages exerted significant pressure on the currency and consumer markets in Belarus. In 2014, growth in consumer imports was more than 18% compared with 2013. Currently, despite the decline in wages, the Belarusian economy still faces significant risks.

The main risk is the need to repay more than USD 4 billion of external debt. The only potential creditor is Russia, but she is in recession a result of economic sanctions and falling oil prices. As Moody’s is preparing to lower Belarus’ credit rating, she has fewer options to borrow on the international markets. Belarus will be unable to repay her public debt in 2015 independently. Amid anticipated closure of tens of thousands of entrepreneurs as of March 1st, 2015 in connection with the new marketing rules, the government is anticipating social tension due to a further reduction in the number of jobs in the economy. And the Belarusian economy is unable to create new jobs to meet the labour market needs.

The Belarusian economy cannot sustain wages above USD 500 for a long time. The sustainability of the Belarusian economic model in the short term will depend on timely financial aid from Russia and successful neutralisation of social tension amid growing unemployment risks.

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Once a week, in coordination with a group of prominent Belarusian analysts, we provide analytical commentaries on the most topical and relevant issues, including the behind-the-scenes processes occurring in Belarus. These commentaries are available in Belarusian, Russian, and English.

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