Economic Analysis


Population 9.4 million
GDP 5,749 US$
Country risk assessment
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major macro economic indicators

  2014 2015  2016 (e) 2017 (f)
GDP growth (%) 1.8 -3.8 -3.0 -0.8
Inflation (yearly average) (%) 18.1 13.5 14.0 12.0
Budget balance (% GDP) 0.7 1.9 -1.9 -2.5
Current account balance (% GDP) -6.9 -3.8 -4.9 -4.8
Public debt (% GDP) 37.3 53.7 54.9 59.2


(e) Estimate (f) Forecast


  • Strategic location between Russia and European Union and well-developed transport system
  • Relatively well-trained and skilled labour
  • Political stability


  • High energy, economic and financial dependence on Russia
  • Omnipresent control by State over the economy and very slow implementation of reforms
  • Danger of liquidity crisis
  • Difficult business climate (high level of corruption, legal system provides little protection)

Risk assessment

The Belarusian economy could emerge from its recession but only slowly

Following the sharp contraction in activity in 2016, activity is unlikely to pick up in 2017. Belarus, which is extremely dependent on the Russian and, to a lesser extent, Ukrainian economies, could avoid a further recession thanks to the slight upturns in growth in these two countries.

The lack of investment is however likely to continue weighing on an industrial sector (almost ¼ of GDP), dominated by food processing (dairy and meat products), mechanical industries (in particular construction machinery and trucks), and petrochemicals. A slight rise in oil prices should help boost its refining sector but the continuing weakness in potash prices will remain a drag on the fertiliser sector.

Measures to reduce public spending, combined with rising prices, are set to limit real wage growth and restrain consumption (accounting for around 50% of GDP). A further fall in household demand could however be avoided thanks to an increase, even if only slight, in migrant workers’ remittances, with over 45% from those working in Russia.

Inflationary pressures, despite being somewhat mitigated by the weakness of domestic demand, will be aggravated by any depreciation in the Belarus ruble.


Deterioration in the public finances and enduring current account deficit

The budget deficit is expected to increase in 2017. Tax receipts will suffer because of the weakness in economic activity. The slowdown in the rate of increase in current expenditure should be more than offset by the increase in public infrastructure investments, in particular in the energy field (construction of a nuclear plant). The financial support, namely in the form of loan guarantees, provided for public companies and banks, experiencing a deterioration in their financial situations, will also be a burden on the public finances. The escalation of public debt, denominated at over 85% in foreign currencies, will also increase the cost of repayment for the country.

The current account deficit is likely to continue into 2017. Export earnings are expected to remain weak, thanks to low potash prices, the leading export product, as well as because of low levels of export demand (CIS and EU). The country, which does not have any oil and gas resources and imports these cheaply from Russia and re-exports refined products at market prices, will feel the benefits of a slight increase in oil and gas prices. Higher prices for the gas it imports from Russia, accepted as part of an agreement signed in October 2016, will add to its fuel bill. The weakness of domestic demand however should help keep imports under control and thus avoid any worsening in the trade deficit.

As of 1 July 2016, the old Belarusian ruble was redenominated to become the new Belarusian ruble (10,000 old rubles to 1 BYR), because of exchange rate pressures and high inflation. The current account deficit is likely to continue causing downwards pressure on the currency. Any subsequent depreciation in the Russian ruble, upon which the BYR exchange rate is highly dependent, will weaken it further.

The low levels of reserves (approximately one month’s imports) is undermining the country’s financial position. The Government is negotiating an IMF aid program, but the obligations in terms of reforms and budget discipline are slowing the progress of the talks. It is possible that an agreement could be reached in 2017.

The lack of transparency in the banking sector (mostly state owned), as well as the extent of government directed lending, makes it difficult to assess the Belarusian banking system. The growth in non-performing loans (13% in June 2016 from 6% in June 2015) does however evidence a worsening in the situation.


Improved relations with the EU despite weak governance

Despite his opposition to the annexation of Crimea, President A. Lukachenko has maintained good relations with Russia, bearing in mind the economic, financial and strategic links between the two countries. Minsk is also trying to improve links with the west and at the beginning of 2016 obtained exemptions to the sanctions imposed by the EU in 2000 on certain Belarusian individuals and companies.

In terms of domestic politics, A. Lukachenko was re-elected for a fifth term in October 2015, with 80% of the votes cast. The legislative elections in September 2016 resulted in the election to Parliament, for the first time ever, of two representatives of the opposition, although the President retains the support of a clear majority in parliament.

Social tensions have been held in check for several years by regular wage rises, guaranteeing increasing purchasing power. The protraction of the economic crisis could undermine this policy and result in rising social discontent.

Despite some progress, Belarus continues to rate very poorly on the World Bank’s governance indicators, and in particular those covering political freedom (186th out of 204), regulatory quality (178th) and control of corruption (114th).

Last update: January 2017

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