With just a few days left until the end of 2020, correspondents of Belsat asked Belarusian economists to summarize this year’s economic results.
In 2020, Belarus faced several crises at once. First, the country, like the whole world, was overtaken by the coronavirus pandemic. And in the second half of the year, there was also political unrest provoked by public distrust of the presidential elections, which is still ungoing.
As a result, many of the authorities’ forecasts for 2020 never materialized. Inflation exceeded the 5% limit, while GDP, on the contrary, went down instead of going up. The dollar rate rose by almost a quarter.
There were some positive things this year, but they all have their “buts”. Leu Lvouski, a senior researcher at the Belarusian Economic Research and Education Center (BEROC), noted in a comment to belsat.eu that the drop in GDP due to the coronavirus crisis was significantly less than that of our neighbors and trading partners:
“But they achieved this, as can be judged from the report that Belstat sent to the UN, at the expense of thousands of additional deaths. The non-stop of production had a positive effect on GDP. Production was not stopped, people were not laid off and received salaries, but this was partially achieved by working for a warehouse. De facto, this means putting off the crisis to a future period, because the goods were made, but not sold. All this, one way or another, will become the debt burden and lead to a less stable financial position of the enterprises involved in this production.”
The head of the Mises Research Center, Yaraslau Ramanchuk, believes that people and businesses in Belarus have been left alone with the coronavirus. In his opinion, Alyaksandr Lukashenka‘s decree No. 143 of April 24 “On supporting the economy” is the most inadequate document of 2020.
Nevertheless, Leu Lvouski notes that enterprises, which, according to BEROC and SATIO polls, said that they would not survive the coronavirus crisis without additional help from the state, “lasted longer than they even expected.” Business actively tried to adjust and survive even in the absence of noticeable support. But, the economist admits, some enterprises have still failed or will not be able to survive the economic crisis, already caused by the political crisis.
“The entrepreneurs finally realized that countries and production live not only on bread and profits. That we must first of all fight for such things as political, economic and civil freedom. This is such an unconditional positive in 2020, which can be emphasized by speaking about economic policy in the broad sense of the word,” said Ramanchuk about the most positive result of this year.
For Belarus 2020 has become the year of another devaluation of the national currency. Compared to January 1, the dollar exchange rate increased by 22%: from 2.1085 BYN to 2.5736 BYN. All this increased the risk of inflation and macroeconomic destabilization, stressed Yaraslau Ramanchuk.
Analyst of the research group BusinessForecast.by Alyaksandr Mukha added that the rather deep devaluation of the Belarusian ruble has already negatively affected the dynamics in the country’s consumer market. Inflation exceeded 6% instead of the planned 5%: “We see an acceleration in inflation, the target has been exceeded. There is a depreciation of the results achieved by the Central Bank in previous years. If we have set a goal to move to inflation targeting in the medium term, it is very important to comply with this target so that inflation is within the stated range. Moreover, it directly affects the purchasing power of the population and, above all, the least socially protected strata, since while the fat one dries up, the thin one dies.”
As a result, the dynamics of population’s income growth slowed down significantly and there was a deepening of social inequality in society, the gap between the rich and the poor. By the beginning of 2021, almost half of Belarusians will have no savings left, added Yaraslau Ramanchuk.
Nevertheless, Leu Lvouski said, the monetary regulation mechanisms introduced by the National Bank in recent years made it possible to achieve the situation when “with a significant decrease in the exchange rate of the Belarusian ruble, our inflation exceeded the expected only by 1.6% (6.6% against 5 %)”. “This is not bad, since there is a large share of imports in our production and consumption,” he stressed.
At the same time, the representative of BEROC believes that the short-term strategies of the National Bank to support the national currency by injecting gold and foreign exchange reserves and freezing ruble liquidity are dangerous if used for a long time.
“The National Bank expects that people will stop putting pressure on the exchange rate and will stop taking deposits from banks. But there is a possibility that this is not a short-term motive, the exchange of rubles for dollars and the withdrawal of these dollars from deposits in banks will continue. If this is the case, the current tightness of ruble liquidity could be fraught with new problems, because both businesses and households need loans,” said Leu Lvouski.
Among the main results of this year, the surveyed economists also listed the weakening of trust between society and state institutions.
“Trust, including in the National Bank, which has been worked towards with big difficulty in recent years, has been undermined. Confidence in the national currency has been undermined. Dollarization has gone up again — the desire of the population to save funds in foreign currency and even conclude deals using it,” Leu Lvouski said.
Yaraslau Ramanchuk is even more critical in his assessments: “The trust of the population and business in the state has been nullified. Losses include billions of dollars, hundreds of thousands of refugees, the departure of tens of thousands of entrepreneurs. The social contract between the authorities and the population, the regulatory contract with business have been torn to shreds and thrown into the trash bin.” According to him, this could mean an “investment drought” for Belarus, since “serious investments will never go to a country where laws are sometimes not up to date.” Especially if the business environment depends on its loyalty to the current authorities.
Alyaksandr Mukha adds that the access of all residents of Belarus to external borrowing has also deteriorated significantly.
Yaraslau Ramanchuk also spoke about other results of 2020 for Belarus.
Thus, the national debt has grown by almost 30%. Almost 60 billion BYN was allocated to repay the debt, or 28.8% of the proceeds in industry – 38.4 billion BYN. Loans on loans increased by 24.5% to 97.5 billion BYN.
The financial condition of enterprises has sharply deteriorated. Their losses in 10 months increased 6.3 times – to 6.4 billion BYN. The number of unprofitable enterprises increased by 26.8%, while the drop in net profit amounted to 58.8%. The construction industry worked with losses of 2 billion BYN. Losses in construction increased 12.8 times, while in the hotel business and catering – 15 times.
An increase in the volume of toxic assets and frozen capital was also noted by the economic experts. Accounts receivable increased by 21.7% to 50.3 billion BYN, including external ones by 44.7%. Warehouse stocks reached 5.3 billion BYN, which is almost 70% of the average monthly production.
Diversification of foreign trade also failed. Exports decreased by 14.6%, imports – by 18.6%. The share of the European Union in the export of goods fell to 17.8%.
Read the economic forecasts of Belarusian economists for 2021 soon on belsat.eu.