Minsk-Forum: Opportunities and Challenges of the Belarussian Economy

On 3 December 2020 the German Eastern Business Association (OA) held a panel discussion on the state of the Belarussian economy as part of the Minsk Forum XVIII. The participants were Manfred Huterer, German Ambassador to Belarus, Alexandr Tschubrik, director of the IPM Research Center, Kateryna Bornukova, economist at the Belarussian Research and Outreach Center, Jaugenij Labanau, Director of the Center for Environmental Solutions, Jeroen Williams, Deputy Head of the EEA Unit at DG Near of the EU Commission, as well as Robert Kirchner, Deputy Team Leader of the German Economic Team.

After the introductory remarks by Ambassador Huterer, a lively discussion on the Belarussian economy developed. All panellists agreed that that the economy is in a difficult state due to a number of factors. Robert Kirchner, Deputy Team Leader of the German Economic Team, shared the overall sober assessment of the panel and emphasized that the current challenges Belarus’ economy faces have both internal and external causes, as well as short- and long-term factors. According to Kirchner, one of the sustained problems of Belarus is the stagnation of GDP during the more or less last ten years since the financial crisis, as well as the general inefficiency of its state-centred economic model.

Adding to these structural problems, the Corona-crisis poses a further challenge affecting also strongholds of the economy, such as the vibrant IT sector. Furthermore, the banking sector shows increasing signs of “dollarization”, which may lead to a capital drain and liquidity risks. This is problematic as Belarus has no strong buffers. While Jeroen Williams painted a slightly brighter picture for the short term, highlighting a good harvest and discretionary fiscal policy measures, he agrees with Kirchner on the questionable long-term prospects of the Belarussian economy. Modest reforms would not help in moving the Belarussian economy forward. For the coming years, there is a lot of uncertainty on the prospects of the Belarussian economy. The World Bank expects the economy to grow at 1% in 2021 after a sharp decline of -4% in 2020, although Belarus did not enact any lockdown measures in response to the Corona crisis. It can be expected that the debate on economic reforms in Belarus will continue.