Mov­ing in the Right Di­rec­tion

The im­ple­men­ta­tion of this year’s gov­ern­ment ac­tion pro­gram will al­low bol­ster­ing the in­ter­nal and ex­ter­nal sta­bil­ity of the Be­laru­sian econ­omy

Economy of Belarus - - CONTENTS -

The im­ple­men­ta­tion of this year’s gov­ern­ment ac­tion pro­gram will al­low bol­ster­ing the in­ter­nal and ex­ter­nal sta­bil­ity of the Be­laru­sian econ­omy

The gov­ern­ment ac­tion pro­gram for 2015 is a sys­temic doc­u­ment that re­flects an en­tire set of in­ter­con­nected mea­sures in macroe­co­nomic pol­icy, for­eign econ­omy pol­icy, struc­tural pol­icy, in­vest­ment pol­icy, in­dus­try-wise pol­icy, re­gional pol­icy, and so­cial pol­icy.

A brief anal­y­sis of the doc­u­ment in­di­cates that ac­tions of the Gov­ern­ment and the Na­tional Bank will be aimed at se­cur­ing fi­nan­cial and price sta­bil­ity in the coun­try, main­tain­ing the steady pace of eco­nomic growth, rais­ing the com­pet­i­tive abil­ity of the na­tional econ­omy, and ob­serv­ing eco­nomic se­cu­rity con­di­tions in the medium term and in the long term.

The avail­abil­ity of three sce­nar­ios con­cern­ing the devel­op­ment of the na­tional econ­omy in 2015 gives the Gov­ern­ment more op­por­tu­ni­ties to promptly re­spond to chang­ing for­eign eco­nomic con­di­tions, in­clud­ing prices for crude oil and oil prod­ucts and changes of the ex­change rate of the Rus­sian ru­ble on the in­ter­na­tional cur­rency mar­ket.

In my view, mon­e­tary tar­get­ing cou­pled with other eco­nomic pol­icy mea­sures will help re­duce the in­fla­tion rate to sin­gle dig­its in the medium term and in the long term. In other words, in­fla­tion will be re­duced to at most 10% in an­nual terms (De­cem­ber of the cur­rent year against De­cem­ber of the pre­vi­ous year).

The re­duc­tion of the an­nual in­fla­tion rate will con­trib­ute to higher trust in the Be­laru­sian ru­ble and the re­duced us­age of U.S. dol­lars in the na­tional econ­omy. Apart from that, slower in­fla­tion pro­cesses will al­low de­creas­ing in­ter­est rates on ru­ble loans and thus in­creas­ing the avail­abil­ity of bor­rowed money and the at­trac­tive­ness of ru­ble loans in com­par­i­son with for­eign cur­rency loans.

In turn, the tran­si­tion to a more flex­i­ble ex­change rate scheme will be highly in­stru­men­tal in min­i­miz­ing the im­pact of for­eign eco­nomic shocks. On 25 Fe­bru­ary Be­laru­sian ex­porters were al­lowed to sell 40% of their for­eign cur­rency pro­ceeds in­stead of 50% on a manda­tory ba­sis. The mea­sure is ex­pected to in­crease the mo­ti­va­tion of Be­laru­sian ex­porters to re­turn their for­eign cur­rency pro­ceeds to the home coun­try. In turn, it will fuel the sup­ply of for­eign cur­rency on the home mar­ket as well as for­eign cur­rency re­sources of Be­laru­sian banks.

Ac­cord­ing to the Na­tional Statis­tics Com­mit­tee of Be­larus, as of 1 Jan­uary 2015 the ex­ter­nal ac­counts re­ceiv­able of Be­laru­sian com­pa­nies to­taled $4.288 bil­lion, with over­due ac­counts re­ceiv­able as high as $495.9 mil­lion. Ac­cord­ing to the Na­tional Bank of the Repub­lic of Be­larus, in Jan­uary 2015 for­eign cur­rency de­posits of Be­laru­sian cor­po­ra­tions and self-em­ployed busi­ness­men dropped by $137.2 mil­lion (3.8% down) to $3.475 bil­lion as of 1 Fe­bru­ary.

The de­val­u­a­tion of the Be­laru­sian ru­ble cou­pled with re­stric­tions on pay rise bol­stered the price-based com­pet­i­tive abil­ity of Be­laru­sian ex­porters on for­eign mar­kets. In the cur­rent sit­u­a­tion cer­tain hopes are pinned onto the pos­si­ble growth of the Rus­sian ru­ble on the in­ter­na­tional cur­rency mar­ket and the ex­pected in­crease in con­sumer prices in Rus­sia. With th­ese con­di­tions in place Be­laru­sian ex­porters will be able to raise prices for their prod­ucts sold in Rus­sia.

At the same time the Gov­ern­ment will work to di­ver­sify the prod­uct choice and des­ti­na­tions of Be­laru­sian ex­port. By the way, in 2014 Be­larus’ top five trad­ing part­ners ac­counted for 70.9% of the coun­try’s ex­port. Be­larus’ top ten trad­ing part­ners ac­counted for 83.2% of the coun­try’s ex­port. The share of the top twenty trad­ing part­ners was as high as 90.9%. The fact in­di­cates it is re­ally im­per­a­tive to di­ver­sify Be­larus’ sales mar­kets.

Ac­cord­ing to the Na­tional Statis­tics Com­mit­tee, in 2014 Be­larus’ top ten for­eign trad­ing part­ners in­cluded Rus­sia ($15.346 bil­lion worth of mer­chan­dise ex­ported, 42.2% of the to­tal mer­chan­dise ex­port), Ukraine ($4.090 bil­lion, 11.2%), the United King­dom ($2.970 bil­lion, 8.2%), the Nether­lands ($1.743 bil­lion, 4.8%), Ger­many ($1.645 bil­lion, 4.5%), Lithua­nia ($1.042 bil­lion, 2.9%), Italy ($1.009 bil­lion, 2.8%), Kaza­khstan ($877.574 mil­lion, 2.4%), Poland ($844.099 mil­lion, 2.3%), and Brazil ($709.653 mil­lion, 2%).

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