ANALYSIS: Crisis 2020. Economic downturn in Belarus continues, latent unemployment on the rise
<p> Monthly overview of Belarus’ money-crediting & banking sector, Jan-July 2020 </p> <p> </p> <p> MINSK, Aug 28 – PrimePress Analysis. The economic crisis in Belarus, which started with the coronavirus epidemic, after the August 9 presidential election was complemented by a political crisis accompanied by acute confrontation between the society and the authorities. The Belarusian state machine aims to preserve the authorities in power and soothe social tension in the community. The economic processes running in the country have been pushed to the very bottom of the agenda. </p> <p> </p> <p> Under the influence of these events, inflation and devaluation expectations are growing rapidly in Belarus, and public trust and investor confidence is lost. The refusal to suspend production during the coronavirus epidemic has led to an increase in hidden unemployment, increased inventories and accelerated inflation. </p> <p> </p> <p> Table 1. Key indicators of Belarus’ macroeconomic performance: </p> <br> <table border="1" cellspacing="1" cellpadding="0"> <tbody> <tr> <td> <p> Indicator </p> </td> <td> <p> Real figures, Jan-Jul 2020, billion Belarusian rubles </p> </td> <td> <p> Jan-Jul 2020 on Jan-Jun 2019, % </p> </td> <td> <p> Official forecast for 2020, % </p> </td> </tr> <tr> <td> <p> GDP </p> </td> <td> <p align="right"> 80.000 </p> </td> <td> <p align="right"> minus 1.6% </p> </td> <td> <p align="right"> +2.8% (+2.2% in Jan-Sep) </p> </td> </tr> <tr> <td> <p> Industrial output </p> </td> <td> <p align="right"> 62.643 </p> </td> <td> <p align="right"> minus 2.5% </p> </td> <td> <p align="right"> +2.2% (+1.5% in Jan-Sep) </p> </td> </tr> <tr> <td> <p> Fixed capital investments </p> </td> <td> <p align="right"> 15.243 </p> </td> <td> <p align="right"> minus 0.3% </p> </td> <td> <p align="right"> +4% (+3.1% in Jan-Sep) </p> </td> </tr> <tr> <td> <p> Inflation growth since early 2017, % </p> </td> <td> <p align="right"> 3.6 </p> </td> <td> <p align="right"> 5.2* </p> </td> <td> <p align="right"> 5% at most (not more than 3.6% in Sep 2020 compared to the level of Dec 2019) </p> </td> </tr> <tr> <td> <p> Foreign trade balance (goods and services), USD million </p> </td> <td> <p align="right"> +757.3** (+2.7% of GDP) </p> </td> <td> <p align="right"> +269.2*** (+0.9% of GDP) </p> </td> <td> <p align="right"> +$650m or + 1% of GDP in 2020 (+$533.7m or +1.8% in H1) </p> </td> </tr> <tr> <td> <p> Real disposable household incomes, year on year, % </p> </td> <td> <p align="right"> +5.4** </p> </td> <td> <p align="right"> +7.0*** </p> </td> <td> <p align="right"> annual forecast +2.4% (+1.3% in H1) </p> </td> </tr> </tbody> </table> <br> <p> * Jul 2020 on Jul 2019 </p> <p> ** Jan-Jun 2020 </p> <p> *** Jan-Jun 2020 </p> <p> </p> <p> GDP growth remains negative </p> <p> </p> <p> The National Statistical Committee of Belarus (Belstat) recorded a decline in the country’s GDP in Jan-Jul 2020, almost all major gross indicators of the real sector also decreased. At the same time, the crisis developing in the country gives grounds to believe that by the end of this year GDP dynamics are unlikely to reach the positive zone (or reach the break-even point). </p> <p> </p> <p> Belstat says Belarus’ GDP declined by 1.6% year on year in Jan-Jul 2020 to Br80 billion, while the forecast for H1 2020 is +1.6% and +2.2% in Jan-Sep 2020. </p> <p> </p> <p> This year’s negative GDP dynamics has been conditioned primarily by the fall in industrial production. Belstat says Belarus’ industrial output decreased by 2.5% year on year in Jan-Jul 2020 and amounted to Br62.643 billion. </p> <p> </p> <p> The decrease in industrial production could have been even more tangible, but despite the decline in external demand due to the coronavirus pandemic, Belarusian enterprises stuck to the produce-to-stock strategy and continued working. </p> <p> </p> <p> Belstat says the warehouse inventories of finished goods in the industrial sector amounted to Br5.303 billion as of Aug 1, 2020, or 74% of the average monthly output of the entire industrial production, to compare with 64% as of Aug 1, 2019. </p> <p> </p> <p> A higher-than-normal level of inventories of finished goods at the warehouses of Belarusian companies has been observed throughout the year. </p> <p> </p> <p> Although the level of inventories decreased month on month, a year-on-year comparison, which takes into account the influence of seasonal factors, does not produce a very good picture of the state of things in the industrial sector. Instead of preserving a financial safety cushion, Belarusian companies actually froze their own (and borrowed) resources in warehouses. </p> <p> </p> <p> Belstat, producers of textiles, clothing, leather goods and fur demonstrated the highest level of warehouse inventories as of August 1, 2020 (4.5 times higher than the average monthly output as of Aug 1, 2020, to compare with 3.7 times as of Aug 1, 2019); computing, electronic and optical equipment (2.7 times higher vs 2.3 times higher), machinery and equipment not included in other groups (2.1 times higher vs 1.6 times higher). </p> <p> </p> <p> Thus, contrary to the statement of the authorities and their hopes for a rapid recovery of demand in the world markets after the coronavirus pandemic, the situation with inventories is not improving. </p> <p> </p> <p> This year’s more favourable weather conditions could contribute to year-on-year increase in farm output in Jan-Jul 2020. Belstat says Belarus’ farm output increased by 2.8% year on year in Jan-Jul 2020 to the tune of Br9.909 billion. </p> <p> </p> <p> As for the dynamics of retail turnover, its positive dynamics in 2020 may be due to both increased household incomes and negative expectations that were present in the run-up to the presidential election and even stronger after the election. </p> <p> </p> <p> Belstat says Belarus’ retail turnover grew 2.9% year on year in Jan-Jul 2020 to Br29.795 billion. Wholesale turnover for this period decreased by 7.7% to Br53.541 billion investments in fixed assets - down 0.3% to Br15.243 billion, cargo turnover - down 7.3% to 68.931 billion tonne-kilometers. </p> <p> </p> <p> Average wage keeps growing in July, employment situation gets worse </p> <p> </p> <p> The election campaigning policy of the authorities determined the positive dynamics of the average salary. Despite the slowdown in GDP growth as well as a decrease in labour productivity, the average accrued wage in nominal terms amounted to Br1,288 in July 2020, up 3.1% month on month and 13.6% year on year. </p> <p> </p> <p> In real terms, the average wage (adjusted for inflation) increased by 8.2% year on year in July 2020. </p> <p> </p> <p> In dollar terms, the average wage also kept demonstrating month-on-month growth in July. Based on the average monthly rate calculated by the National Bank, the dollar equivalent of the average wage in July 2020 stood at $533.6 compared to $524 in June 2020 and $554.2 in July 2019. </p> <p> </p> <p> Due to quarantine and a decline in business activity in Belarus’ trade partner countries, there was a very significant increase in hidden unemployment in the first half of the year. </p> <p> </p> <p> Belstat says 124 thousand workers (4.3% of the list of employees on average for January-June) worked in the mode of forced part-time employment in the first half of 2020, compared to 45.9 thousand people (1.6%) in the first half of 2019. </p> <p> </p> <p> Despite the quarantine imposed by many countries, the number of Belarusians working abroad has increased. According to a sampling survey of private households, 88.2 thousand people worked abroad in the first half of 2020, up 1.9% year on year. 65.1% of them worked in Russia. </p> <p> </p> <p> Obviously, the political crisis will contribute to an increase in the outflow of Belarusian labour force (especially qualified) abroad. </p> <p> </p> <p> Annual inflation remains above forecast </p> <p> </p> <p> In July, consumer prices grew 0.2% month on month. In year-on-year terms Belarus’ inflation climbed to 5.2%, which exceeds the (5%) ceiling for the current year. </p> <p> </p> <p> Belstat says consumer prices in Belarus increased by 3.6% in June compared to the level of December 2019. In particular, food prices grew 3.1% since early 2020 (minus 0.1% month on month in July), while non-food products - up 3.3% (+0.3%). Tariffs for services increased by 4.7% (+0.5% in July). </p> <p> </p> <p> The inflation dynamics deteriorated primarily due to accelerated growth of fruit and vegetable prices from 11.5% year on year in May to 21.5% in June 2020 and 21.9% in July. </p> <p> </p> <p> Annual core inflation in July 2020 stood at 3.8%, after June’s 3.7%. Trend inflation accelerated to 3.3% in July against 3.1% in June 2020. Administered prices and tariffs increased by 6.3% year on year after June’s 6.7%. </p> <p> </p> <p> Back in the first half of August, the National Bank remained optimistic about fulfilling the end-of-year inflation forecast. However, the political crisis has led to a sharp increase in inflation and devaluation expectations of private households and businesses, which reduces the probability of achieving the inflation forecast. </p> <p> </p> <p> Political instability aggravates economic risks </p> <p> </p> <p> It has become obvious that Belarus’ authorities will hardly manage to restore the Belarusian economy in the second half of 2020. </p> <p> </p> <p> This will be hindered by such consequences of the growing political crisis in Belarus as: sharp deterioration of business conditions, inflation and growing devaluation expectations, social tension both in the society in general and at industry flagships in particular, decreased confidence in the government’s economic policy. </p> <p> </p> <p> Amid unprecedented pressure of the authorities on society and business, which began after the election, individuals are withdrawing Br and FX deposits from banks, private households and businesses are buying up foreign currency, some investors in the IT sector have already openly announced their plans to relocate offices from the Belarusian jurisdiction. End </p> <p> </p> <p> PrimePress Business Analysis Agency </p>
2020-08-29
Primepress
Monthly overview of Belarus’ money-crediting & banking sector, Jan-July 2020
MINSK, Aug 28 – PrimePress Analysis. The economic crisis in Belarus, which started with the coronavirus epidemic, after the August 9 presidential election was complemented by a political crisis accompanied by acute confrontation between the society and the authorities. The Belarusian state machine aims to preserve the authorities in power and soothe social tension in the community. The economic processes running in the country have been pushed to the very bottom of the agenda.
Under the influence of these events, inflation and devaluation expectations are growing rapidly in Belarus, and public trust and investor confidence is lost. The refusal to suspend production during the coronavirus epidemic has led to an increase in hidden unemployment, increased inventories and accelerated inflation.
Table 1. Key indicators of Belarus’ macroeconomic performance:
Indicator |
Real figures, Jan-Jul 2020, billion Belarusian rubles |
Jan-Jul 2020 on Jan-Jun 2019, % |
Official forecast for 2020, % |
GDP |
80.000 |
minus 1.6% |
+2.8% (+2.2% in Jan-Sep) |
Industrial output |
62.643 |
minus 2.5% |
+2.2% (+1.5% in Jan-Sep) |
Fixed capital investments |
15.243 |
minus 0.3% |
+4% (+3.1% in Jan-Sep) |
Inflation growth since early 2017, % |
3.6 |
5.2* |
5% at most (not more than 3.6% in Sep 2020 compared to the level of Dec 2019) |
Foreign trade balance (goods and services), USD million |
+757.3** (+2.7% of GDP) |
+269.2*** (+0.9% of GDP) |
+$650m or + 1% of GDP in 2020 (+$533.7m or +1.8% in H1) |
Real disposable household incomes, year on year, % |
+5.4** |
+7.0*** |
annual forecast +2.4% (+1.3% in H1) |
* Jul 2020 on Jul 2019
** Jan-Jun 2020
*** Jan-Jun 2020
GDP growth remains negative
The National Statistical Committee of Belarus (Belstat) recorded a decline in the country’s GDP in Jan-Jul 2020, almost all major gross indicators of the real sector also decreased. At the same time, the crisis developing in the country gives grounds to believe that by the end of this year GDP dynamics are unlikely to reach the positive zone (or reach the break-even point).
Belstat says Belarus’ GDP declined by 1.6% year on year in Jan-Jul 2020 to Br80 billion, while the forecast for H1 2020 is +1.6% and +2.2% in Jan-Sep 2020.
This year’s negative GDP dynamics has been conditioned primarily by the fall in industrial production. Belstat says Belarus’ industrial output decreased by 2.5% year on year in Jan-Jul 2020 and amounted to Br62.643 billion.
The decrease in industrial production could have been even more tangible, but despite the decline in external demand due to the coronavirus pandemic, Belarusian enterprises stuck to the produce-to-stock strategy and continued working.
Belstat says the warehouse inventories of finished goods in the industrial sector amounted to Br5.303 billion as of Aug 1, 2020, or 74% of the average monthly output of the entire industrial production, to compare with 64% as of Aug 1, 2019.
A higher-than-normal level of inventories of finished goods at the warehouses of Belarusian companies has been observed throughout the year.
Although the level of inventories decreased month on month, a year-on-year comparison, which takes into account the influence of seasonal factors, does not produce a very good picture of the state of things in the industrial sector. Instead of preserving a financial safety cushion, Belarusian companies actually froze their own (and borrowed) resources in warehouses.
Belstat, producers of textiles, clothing, leather goods and fur demonstrated the highest level of warehouse inventories as of August 1, 2020 (4.5 times higher than the average monthly output as of Aug 1, 2020, to compare with 3.7 times as of Aug 1, 2019); computing, electronic and optical equipment (2.7 times higher vs 2.3 times higher), machinery and equipment not included in other groups (2.1 times higher vs 1.6 times higher).
Thus, contrary to the statement of the authorities and their hopes for a rapid recovery of demand in the world markets after the coronavirus pandemic, the situation with inventories is not improving.
This year’s more favourable weather conditions could contribute to year-on-year increase in farm output in Jan-Jul 2020. Belstat says Belarus’ farm output increased by 2.8% year on year in Jan-Jul 2020 to the tune of Br9.909 billion.
As for the dynamics of retail turnover, its positive dynamics in 2020 may be due to both increased household incomes and negative expectations that were present in the run-up to the presidential election and even stronger after the election.
Belstat says Belarus’ retail turnover grew 2.9% year on year in Jan-Jul 2020 to Br29.795 billion. Wholesale turnover for this period decreased by 7.7% to Br53.541 billion investments in fixed assets - down 0.3% to Br15.243 billion, cargo turnover - down 7.3% to 68.931 billion tonne-kilometers.
Average wage keeps growing in July, employment situation gets worse
The election campaigning policy of the authorities determined the positive dynamics of the average salary. Despite the slowdown in GDP growth as well as a decrease in labour productivity, the average accrued wage in nominal terms amounted to Br1,288 in July 2020, up 3.1% month on month and 13.6% year on year.
In real terms, the average wage (adjusted for inflation) increased by 8.2% year on year in July 2020.
In dollar terms, the average wage also kept demonstrating month-on-month growth in July. Based on the average monthly rate calculated by the National Bank, the dollar equivalent of the average wage in July 2020 stood at $533.6 compared to $524 in June 2020 and $554.2 in July 2019.
Due to quarantine and a decline in business activity in Belarus’ trade partner countries, there was a very significant increase in hidden unemployment in the first half of the year.
Belstat says 124 thousand workers (4.3% of the list of employees on average for January-June) worked in the mode of forced part-time employment in the first half of 2020, compared to 45.9 thousand people (1.6%) in the first half of 2019.
Despite the quarantine imposed by many countries, the number of Belarusians working abroad has increased. According to a sampling survey of private households, 88.2 thousand people worked abroad in the first half of 2020, up 1.9% year on year. 65.1% of them worked in Russia.
Obviously, the political crisis will contribute to an increase in the outflow of Belarusian labour force (especially qualified) abroad.
Annual inflation remains above forecast
In July, consumer prices grew 0.2% month on month. In year-on-year terms Belarus’ inflation climbed to 5.2%, which exceeds the (5%) ceiling for the current year.
Belstat says consumer prices in Belarus increased by 3.6% in June compared to the level of December 2019. In particular, food prices grew 3.1% since early 2020 (minus 0.1% month on month in July), while non-food products - up 3.3% (+0.3%). Tariffs for services increased by 4.7% (+0.5% in July).
The inflation dynamics deteriorated primarily due to accelerated growth of fruit and vegetable prices from 11.5% year on year in May to 21.5% in June 2020 and 21.9% in July.
Annual core inflation in July 2020 stood at 3.8%, after June’s 3.7%. Trend inflation accelerated to 3.3% in July against 3.1% in June 2020. Administered prices and tariffs increased by 6.3% year on year after June’s 6.7%.
Back in the first half of August, the National Bank remained optimistic about fulfilling the end-of-year inflation forecast. However, the political crisis has led to a sharp increase in inflation and devaluation expectations of private households and businesses, which reduces the probability of achieving the inflation forecast.
Political instability aggravates economic risks
It has become obvious that Belarus’ authorities will hardly manage to restore the Belarusian economy in the second half of 2020.
This will be hindered by such consequences of the growing political crisis in Belarus as: sharp deterioration of business conditions, inflation and growing devaluation expectations, social tension both in the society in general and at industry flagships in particular, decreased confidence in the government’s economic policy.
Amid unprecedented pressure of the authorities on society and business, which began after the election, individuals are withdrawing Br and FX deposits from banks, private households and businesses are buying up foreign currency, some investors in the IT sector have already openly announced their plans to relocate offices from the Belarusian jurisdiction. End
PrimePress Business Analysis Agency