Economy of Belarus

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Economy of Belarus
Currency Belarusian ruble (BYB/BYR)
Fiscal year Calendar year
Trade organisations CIS
Statistics
GDP ranking 64th (2005) [1]
GDP $79.13 billion (2005 est.)
GDP growth 8% (2005 est.)
GDP per capita $7,700 (2005 est.)
GDP by sector agriculture (8.9%), industry (26.8%), services (64.3%) (2005 est.)
Inflation 8% (2005 est.)
Labour force 4.3 million (31 December 2005)
Labour force by occupation agriculture (14%), industry (34.7%), services (51.3%) (2003 est.)
Unemployment 1.6% officially registered unemployed; large number of underemployed workers (2005)
Main industries metal-cutting machine tools, tractors, trucks, earthmovers, motorcycles, televisions, chemical fibers, fertilizer, textiles, radios, refrigerators
Trading partners
Exports $16.14 billion f.o.b. (2005 est.)
Main partners Russia 47%, UK 8.3%, Netherlands 6.7%, Poland 5.3% (2004)
Imports $16.94 billion f.o.b. (2005 est.)
Main partners Russia 68.2%, Germany 6.6%, Ukraine 3.3% (2004)
Public finances
Public debt $NA
Revenues $5.903 billion (2005 est.)
Expenses $6.343 billion, including capital expenditures of $180 million (2005 est.)
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Contents

[edit] Overview

After the collapse of the Soviet Union all former Soviet republics faced a deep economic crisis. Belarus has however chosen its own way of overcoming this crisis. After the 1994 election of Alexander Lukashenko as the first President, he launched the country on the path of "market socialism" as opposed to what Lukashenko considered "wild capitalism" chosen by Russia at that time. In keeping with this policy, administrative controls over prices and currency exchange rates were introduced. Also the state's right to intervene in the management of private enterprise was expanded.

In addition to the burdens imposed by high inflation, businesses have been subject to pressure on the part of central and local governments, e.g., arbitrary changes in regulations, numerous rigorous inspections, and retroactive application of new business regulations prohibiting practices that had been legal. Further economic problems are two consecutive bad harvests, 1998-1999 and trade deficits. Also as Belarusian economy has rather tight connections with Russian economy, the default of the 1998 strike hit both of them hard. In the 1990s povetry became a significant problem. Research carried out in Belarus in 1996 under the support of the World Bank showed that the number of poor has sharply increased from 5 % in 1992 to 22% in 1995. According to the official statistics, 26.7% of urban population and 33.6% of rural population were below the poverty line in 2001 ([2], [3], [4]).

However, efforts of Belarusian government and some favourable factors such as the Union with Russia which opened vast markets for Belarusian goods and also allowed Belarus to buy oil and gas at Russia's internal price, allowed Belarus to bypass the severe economic hardships and crises that many former Soviet Union transition economies encountered. It resulted in the economic growth seen in recent years. According to the UN World Economic Situation and Prospects 2006 report Belarus registers major economic growth: GDP growth rate as low as 3% in 1999 showed 11% (2-nd place in CIS) in 2004 and 8,5% (4-th place after Azerbaijan and Kazakhstan - oil and gas exporters - and Armenia) in 2005. In terms of GDP growth rate Belarus also outperforms neighbouring Poland, Latvia and Lithuania. Major problem in mid-1990 - inflation, as high as 300% in 1999 constantly decreases, showing 12% in 2005 (which is higher than Russia's 11.5% but lower than Ukraine's 14.5%). UN experts forecast inflation in 2006 will continue to decrease, reaching 10.5% (UN Report)

[edit] In greater depth

As part of the former Soviet Union, Belarus had a relatively well-developed industrial base; it retained this industrial base following the break-up of the U.S.S.R. The country also has a broad agricultural base and a high education level. Among the former republics of the Soviet Union, it had one of the highest standards of living. But Belarusians now face the difficult challenge of moving from a state-run economy with high priority on military production and heavy industry to a civilian, free-market system.

After an initial outburst of capitalist reform from 1991-1994, including privatization of state enterprises, creation of institutions of private property, and entrepreneurship, Belarus under Lukashenko has greatly slowed its pace of privatization and other market reforms, emphasizing the need for a "socially oriented market economy." About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. The banks, which had been privatized after independence, were renationalized under Lukashenko.

Economic output, which declined for several years, revived somewhat in the late 1990s, but the economy remains dependent on Russian subsidies. Until 2000, subsidies to state enterprises and price controls on industrial and consumer staples constituted a major feature of the Belarusian economy. Inflationary monetary practices, including the printing of money also has been regularly used to finance real sector growth and to cover the payment of salaries and pensions.

Peat, the country's most valuable mineral resource, is used for fuel and fertilizer and in the chemical industry. Belarus also has deposits of clay, sand, chalk, dolomite, phosphorite, and rock and potassium salt. Forests cover about a third of the land, and lumbering is an important occupation. Potatoes, flax, hemp, sugarbeets, rye, oats, and wheat are the chief agricultural products. Dairy and beef cattle, pigs, and chickens are raised. Belarus has only small reserves of petroleum and natural gas and imports most of its oil and gas from Russia. The main branches of industry produce tractors and trucks, earth movers for use in construction and mining, metal-cutting machine tools, agricultural equipment, motorcycles, chemicals, fertilizer, textiles, and consumer goods. The chief trading partners are Russia, Ukraine, Poland, and Germany.

The massive nuclear accident (April 26, 1986) at the Chernobyl nuclear power plant, across the border in Ukraine, had a devastating effect on Belarus; as a result of the radiation release, agriculture in a large part of the country was destroyed, and many villages were abandoned. Resettlement and medical costs were substantial and long-term.

In 2000, Belarus managed to unify its currency exchange rates, tightened its monetary policy, and partially liberalized the foreign currency market. These developments led to the conclusion of a staff-monitored program in cooperation with the International Monetary Fund, addressing, among other topics price and wage liberalization, a widening of privatization, fiscal reform, the adoption of international accounting standards in the banking sector, and the repeal of several egregious laws and decrees to improve the investment climate. The program was conducted between April and September 2001, with relatively disappointing results. The IMF noted last year that market-oriented structural reforms have stalled. Privatization has largely ground to a halt and the private sector's share of GDP remains low at around 25 percent. Further, the "golden share" rule has been expanded in 2004, giving government a unique power to intervene in any company which used to have state ownership. The business environment is not conducive to private—including foreign—investment.[5]

In 2005, the World Bank reported that the high cost, low flexibility business environment in the Belarusian economy inhibited its ability to create new jobs, while "exports remain insufficiently diversified" and competitiveness of Belarusian products on CIS and non-CIS markets has been deteriorating. The World Bank explains that the growth has been within a few sectors (energy, fuel, and metallurgy), while other enterprises did not experience any noticeable improvements in investment levels before 2003 and the absence of a thriving private sector compromises the ability of Belarus to make necessary adjustments to potential changes in market conditions. The report recommends that the Lukashenko administration make efforts to address a number of pending issues in all the core areas of liberalization, macroeconomic stabilization (including price and exchange rate stability), privatization, and wide-ranging structural reforms. [6]

The World Bank is currently considering a new country assistance strategy for Belarus, focusing on areas such as targeted social assistance, AIDS/HIV and tuberculosis prevention, environmental protection, Chernobyl-related damage, and small and medium enterprise development. In June 2001, the World Bank approved a loan of $22.6 million to finance repairs in over 450 schools, hospitals, and homes for orphans, the elderly and the disabled throughout Belarus.

[edit] Environmental issues

Belarus has established ministries of energy, forestry, land reclamation, and water resources and state committees to deal with ecology and safety procedures in the nuclear power industry. The most serious environmental issue in Belarus results from the 1986 accident at the Chernobyl nuclear power plant. About 70% of the nuclear fallout from the plant landed on Belarusian territory, and about 25% of the land is considered uninhabitable. But government restrictions on residence and use of contaminated land are not strictly enforced. As noted, the government receives USA assistance in its efforts to deal with the consequences of the radiation.

[edit] Other statistics

Investment (gross fixed): 24.2% of GDP (2005 est.)

Household income or consumption by percentage share:

  • lowest 10%: 5.1%
  • highest 10%: 20% (1998)

Distribution of family income - Gini index: 21.7 (1998)

Agriculture - products: grain, potatoes, vegetables, sugar beets, flax; beef, milk

Industrial production growth rate: 15,6% (2005 est.)

Electricity:

  • production: 30 TWh (2004)
  • consumption: 34.3 TWh (2004)
  • exports: 0.8 TWh (2004)
  • imports: 3.2 TWh (2003), mainly from Russia and Lithuania [7]

Electricity - production by source:

  • fossil fuel: 99.5%
  • hydro: 0.1%
  • other: 0.4% (2001)
  • nuclear: 0%

Oil:

  • production: 36,000 bbl/day (2004 est.)
  • consumption: 285,000 bbl/day (2003 est.)
  • exports: 14,500 bbl/day (2003 est.)
  • imports: 360,000 bbl/day (2004 est.)

Natural gas:

  • production: 250 million cu m (2004 est.)
  • consumption: 18.8 billion cu m (2004 est.)
  • exports: 0 cu m (2004 est.)
  • imports: 18.5 billion cu m (2004 est.)

Current account balance: $312.4 million (2005 est.)

Exports - commodities: machinery and equipment, mineral products, chemicals, metals; textiles, foodstuffs

Imports - commodities: mineral products, machinery and equipment, chemicals, foodstuffs, metals

Reserves of foreign exchange & gold: $835.4 million (2005 est.)

Debt - external: $4.662 billion (30 June 2005 est.)

Exchange rates: Belarusian rubles per US dollar - 2,150 (2005), 2,170 (2004), 1,790.92 (2003), 1,920 (2002), 1,390 (2001), 876.75 (2000)

[edit] References

[edit] See also

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