Belarus will proceed with policy of balancing
Belarus hopes to reduce regional security threats with a new negotiation process, since the policy of balancing between the warring parties is close to exhaustion, as the West-2017 military exercises have demonstrated.
The West-2017 exercises have been held without significant excesses in terms of regional security, and confirmed that Belarus, even in alliance with Russia, was not a regional threat. The Belarusian authorities controlled the number of troops and weapons, the order and location of the exercises in Belarus and the compliance with the approved and promulgated scenario. Conventionally, Belarus has failed in providing adequate information coverage for the exercises.
However, these shortcomings had little impact on the overall outcome of the exercises for the region: Russia held an intimidation action and demonstrated its ability to create regional military threats around the perimeter - at training facilities in the Kaliningrad, Leningrad and Pskov regions and in Belarus in the framework of the West-2017 exercises; in the Astrakhan region within the framework of Combat Commonwealth-2017; at the troops training facilities in their permanent deployment areas, and, according to NATO spokesman O. Lungescu, in the Arctic, the Far East, the Black Sea near the border with Ukraine, and also in Abkhazia.
The growing hostility between Russia and all other Belarus’ neighbours has prompted the latter to look for ways to relax tension in the region. Foreign Minister Makey at the UN General Assembly last week attempted to promote the idea of negotiations in Minsk between Russia, the EU, China and the US, to work out common approaches to regional security and consolidate mutual commitments. Minsk is likely to continue the policy of balancing, strengthening mutual trust with the EU, the US and China, while continuing close cooperation with Russia.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.