Newsletter Issue 71 | July – August 2021

Rising inflation endangers macroeconomic stability

Like in most of the countries around the globe, the COVID-19 pandemic also had a negative impact on the Belarusian economy. While the GDP decline was rather moderate, a rapidly rising inflation can be observed, currently at 9.8% yoy. This is directly related to the depreciation of the Belarusian ruble, which weakened by almost 20% against the US dollar in 2020. The Belarusian authorities reacted rather quickly to emerging inflationary pressures with a series of administrative measures to limit price increases. From an economic policy perspective, however, administrative measures are not an appropriate instrument for fighting inflation. The focus of the authorities should therefore primarily be on a tighter monetary policy stance to lower the high level of inflation and thus restore macroeconomic stability.


Newsletter Issue 70 | May – June 2021

High degree of uncertainty clouds economic prospects

After contracting by a comparatively low 0.9% last year, the Belarusian economy is currently showing signs of recovery: in the first 5 months of the year, GDP grew by 3.1%. However, this development should not be overestimated, as it is mainly driven by base effects. For the year as a whole, a further GDP decline of 0.4% and rather a stagnation of the economy should be expected from today’s perspective. However, this outlook is accompanied by a very high degree of uncertainty. The currently discussed economic and financial sanctions by the EU and possible actions by other countries will be an important factor, even though the exact extent of their impact is not yet fully foreseeable. The current tensions in the wake of the political crisis can be seen most clearly on the Eurobond market, where yields on Belarusian government bonds have recently risen significantly.


Newsletter Issue 69 | March – April 2021

Timid reform of the state-supported export financing

Belarus has reformed export financing for the first time in several years. So far, state-supported export financing was largely monopolised at the Belarusian Development Bank. In the area of medium- and long-term export financing, there has been no possibility for commercial banks to offer export credits with state-supported interest rates since 2016. The recent legal amendment, which took place in February 2021, moderately expands the possibilities of commercial banks in the areas of export production financing, export factoring and small export credits. The Development Bank can also access new business areas, such as export production financing and export factoring. Overall, however, the reform falls well short of expectations.


Newsletter Issue 68 | January – February 2021

Against the tide: No economic recovery in sight

Last year, the entire global economy was dominated by a single issue – the COVID-19 pandemic. With a GDP decline of 0.9%, Belarus made it through the crisis relatively unscratched. This can be explained primarily by the almost complete absence of local lockdown measures.


Newsletter Issue 67 | November – December 2020

The Belarusian banking sector faces new challenges

At first glance, not much has changed in the Belarusian banking sector. The number of banks has been constant for years at a total of 24. The size of the sector, measured by the ratio of assets to GDP, has also remained relatively stable. At the same time, about two-thirds of the sector is dominated by state-owned banks, which primarily provide financing to state-owned enterprises. Banks with Russian capital also play an important role, which leaves private (including Western) banks with a correspondingly small market share. 


Newsletter Issue 66 | September – October 2020

Domestic bond markets as an alternative financing source

The Belarusian economy is currently in a recession, facing capital outflows and devaluation of its currency. The banking sector is highly exposed to state enterprises, and may be strained further as borrowers’ solvency deteriorates. Over the long term, developing local currency instruments in the domestic capital markets could make the financial system more resilient, and reduce reliance on a fragile banking system. There is significant potential in the domestic bond market as many enterprises have already issued in the market. However, local currency instruments are under-developed, reflecting the wider substitution of foreign currency in the financial system, and pricing and allocation of such bonds has been largely on non-market terms


Newsletter Issue 65 | July – August 2020

Current trends in the ICT sector: Pandemic as opportunity?

After the Belarusian ICT sector had already undergone impressive development in previous years, the current COVID-19 crisis has further accelerated this trend: in the first seven months of the year, the ICT sector’s share in GDP reached 7.6% – significantly higher than in the previous year (6.2%). A key factor is the sector’s strong export orientation, which generated total revenues of USD 2.4 bn in 2019 (equivalent to 25% of total service exports).


Newsletter Issue 64 | May – June 2020

COVID-19 pandemic glooms economic outlook

After a significant slowdown in 2019, the Belarusian economy slides into recession in 2020. The projected decline in real GDP of 6% mainly reflects the influence of external factors: globally low energy prices and other repercussions of the COVID-19 pandemic, but also renewed problems with oil supplies from Russia and the continuation of the Russian tax manoeuvre. The latter is steadily increasing the pressure on the national budget and leaves little room for any public stimulus packages. The depreciation of the currency and rising wages in the run-up to the presidential elections in August 2020 imply substantial challenges to the National Bank; nevertheless, inflation remains well under control. Debt repayments and foreign exchange interventions have diminished FX reserves, implying additional risks against the background of a deteriorating current account. We expect the economy to recover in 2021, but this will not fully compensate for the losses in 2020.


Newsletter Issue 63 | March – April 2020

The economic impact of the Russian oil tax manoeuvre

While most observers focus on the current turmoil in global oil markets and the resulting steep price decline, Belarus is currently facing an additional challenge. By the end of 2024 the price of oil imported by Belarus from Russia will increase by 30% due to a reform of oil taxation in Russia – the so-called “Russian tax manoeuvre”. It is clear that the manoeuvre will have a significant impact on the Belarussian economy – especially on its oil refineries which contribute significantly to exports and budget revenues. An analysis by GET suggests that the main impact will stem from increasing prices for fuels on the domestic market as refineries pass on the higher cost of oil which is bad news for private households and companies alike.


Newsletter Issue 62 | January – February 2020

Economic growth continues to slow down

Economic growth slowed down significantly due to external factors and amounted to only 1.2% in 2019. High uncertainty about future supply conditions for Russian crude oil and gas, as well as ongoing structural problems, further dampen future growth prospects: the forecasts for 2020 (0.9%) and 2021 (0.5%) remain at a similarly low level.


Newsletter Issue 61 | November – December 2019

Belarus-Russia: Is bilateral integration happening?

Since December 2018, Belarus and Russia have been in talks over the prospects of deepening their bilateral integration. The negotiations have taken place behind closed doors and provoked all sorts of rumours and fears in Belarus and the West. While difficult talks continue, the authorities in Minsk stress that national sovereignty is an absolute value and a “red line”.


Newsletter Issue 60 | September – October 2019

Improving the business climate – Proposals from business

After the recession in 2015/2016, the Belarusian economy is back on a growth path. Nevertheless, more growth and investment of the private sector is required if Belarus is to catch up with the advanced economies. A joint study of GET Belarus together with three German business associations presents 35 proposals from German businesses on how to improve the business climate and unlock more private investment in Belarus.


Newsletter Issue 59 | July – August 2019

External factors dampen economic growth

Due to external factors, the economic development is once again losing momentum. The forecast for 2019 has been revised downwards once again and now stands at only 1.8%. One of the main reasons for this is the pollution of the “Druzhba” oil pipeline, which has a negative impact on the production and export of oil products. The growth forecast for 2020 remains even weaker at 1.3%.


Newsletter Issue 58 | May – June 2019

Banking sector weighed down by legacy of state-led lending

Belarus’ banking sector continues its recovery from the 2015-16 recession. Overall credit has again been growing since late 2017, with credit allocation shifting towards households and private enterprises. As the exchange rate stabilized and inflation has come down, local currency interest rates have markedly declined, encouraging a shift of deposits and lending into local currency. At the same time, it is still not clear that the sector is equipped to support further growth in the economy, and the long-overdue structural change towards private enterprises. In this regard, the legacy of delinquent loans of state-owned enterprises still needs to be resolved, and will require broader governance reform in the corporate sector. In this transition capital markets could become a more important source of funds.


Newsletter Issue 57 | March – April 2019

Belarus-Russia: where are current tensions leading?

Like many times before, Belarus and Russia are disputing the terms of their special relationship. However, geopolitics and Russia’s oil tax manoeuvre have made current tensions more serious by aggravating fundamental contradictions between the allies. Belarusian- Russian relations await bumpy times ahead, with their future depending on whether Minsk and
Moscow will manage to find a mutually beneficial alliance model in the new geopolitical reality.


Newsletter Issue 56 | January – February 2019

Economic recovery continues, but loses steam

The Belarusian economy continued to recover in 2018 (3.0%), with 2.4% growth forecast for 2019. The recovery, however, is cyclical in nature and already beyond its peak. Without any further economic reforms, medium- term growth is likely to remain capped at around 2.0% per annum.


Newsletter Issue No. 55 | November – December 2018

The digital economy in Belarus: a liberal enclave

The information and communications technology (ICT) sector in Belarus has established itself as a significant source of employment, export revenues and innovation. This is a welcome source of dynamism, as the reform of state-owned manufacturing industries has not progressed significantly.


Newsletter Issue No. 54 | September – October 2018

How can Belarus benefit from the Belt and Road Initiative?

Since the announcement of the Belt and Road Initia-tive (BRI) in 2013, the role of Belarus as an important transport gateway that links China with the EU be-came even more pronounced. How can the country benefit from the initiative and what are the implica-tions for the economy?


Newsletter Issue No. 52 | May – June 2018

Belarus exports: new opportunities on traditional markets

Belarus is an open economy with exports exceeding 50% of GDP. However, about half of Belarus’ exports go to the Russian market. As such, regional diversification of exports has become one of the key priorities of economic policy.


Newsletter Issue No. 51 | March – April 2018

Belarus-EU: growing cooperation without breakthroughs

Whereas in 2016 Belarus-EU relations saw progress on political matters with little economic effects, the year 2017 and the beginning of 2018 registered the opposite trend: Minsk and Brussels remain stuck in negotiations on landmark political issues, but demonstrate good dynamics in sectoral dialogues and project cooperation. Moreover, after a serious decline in 2015-2016, trade between Belarus and EU member states is on the rise.


Newsletter Issue No. 50 | January – February 2018

Banking Sector: Gradual improvement, but challenges remain

The banking sector in Belarus mirrors the overall economic picture: After some rather difficult years 2015-2016, when credit extension was shrinking, the interest rates were very high, and the level of bad assets was rapidly increasing, some stabilisation and recovery has gained pace.