Measures to support industry will not save Belarusian economy from further fall

In January – October 2015, GDP fell by 3.9%. The authorities’ measures undertaken in October in order to preserve employment have somewhat offset the decline in production at major Belarusian industries. The Belarusian government has exhausted all domestic remedies to reverse the negative trends in the economy. The government is unlikely to switch on the money printing due to the ongoing talks with the IMF over a new loan.

According to the National Statistics Committee, in January – October 2015, Belarus’ GDP fell by 3.9% compared with the same period in 2014. In January – September GDP fell by 3.7%. Indices have fallen in all economic activities except retail trade. Investments in fixed assets decreased by 14.1%, the drought has led to a decrease in the agricultural production by 3.9%, freight transportation has decreased by 3%, industrial production has decreased by 7.1% and stocks in October have increased by BYR 673 billion.

In October, in order to reduce social tension in the view of the Presidential campaign, the authorities undertook measures to encourage artificial employment at various industrial enterprises. As a result, rubber industry has increased production, and mechanic and electrical engineering have improved performance. This has somewhat allowed to offset reduced production in food and chemical industries, and refining.

The authorities’ measures were only temporary. Budgetary constraints would not allow carrying on with such measures and enterprises would have to carry out mass layoffs in order to improve their financial health and performance. This would further reduce people’s incomes and retail trade turnover.

In Q4 2015, the production of potash decreased due to repair works, consequently leading to reduced indices in wholesale and transport. The main volume of agricultural works has been completed, meaning that agricultural indices will not change significantly. The Russian economy has shrunk by 3.7% since early 2015 without any positive outlook, which means that Belarus would be unable to increase her exports on the Russian market. Amid talks with the IMF, the Belarusian authorities would refrain from further measures to stimulate the economy through money printing and the industry would continue its fall. For the first time in the past 15 years, GDP may shrink by 4.1-4.3% by the year-end.

The government’s measures have only slightly slowed down recession in Belarus. Since it is impossible to achieve GDP growth in 2015 anyway, the government will not switch on the money printing press to stimulate the economy.