Details: Foreign investors almost halve fixed capital investments in Belarus in 2020

<p> MINSK, Feb 8 - PrimePress. Belarus reduced capital investments by 6.8% year on year in 2020 after a 6.6% increase in 2019, the National Statistics Committee of Belarus (Belstat) said in a report. </p> <p>   </p> <p> At the same time, foreign investors’ funds to finance investments in fixed assets decreased by 45.9% year on year to Br834.5 million ($318 million at the exchange rate of the National Bank of Belarus). </p> <p>   </p> <p> The total volume of investment in fixed assets in 2020 amounted to Br28.716 billion ($10.926 billion, $1 - Br2.6282). The volume of construction and installation works amounted to Br15.319 billion ($5.829 billion), up 1.4% year on year. As much as Br10.436 billion ($3.971bn) was spent on buying machines, equipment, and vehicles in 2020, down 16.4% year on year. </p> <p>   </p> <p> As of January 1, 2021, there were 6.3 thousand construction projects in progress against 6.8 thousand in early 2020. The construction of 1 thousand objects was temporarily suspended and mothballed. </p> <p>   </p> <p> In 2020, funds invested in housing construction totalled Br5.8 billion ($2.207 billion), or 20% of the total volume of fixed capital investment. In 2020, 4.156m sq m of housing was commissioned (+2.3% yoy), of which 31.4% was commissioned with the use of low-interest loans fr om state-owned banks. </p> <p>   </p> <p> Investments in active part of fixed assets decreasing </p> <p>   </p> <p> Overall, we can note the declining investment activity in the Belarusian economy against the background of the global economic crisis and the domestic political crisis. </p> <p>   </p> <p> The decline in total investment was due to a decrease in investment in the active part of fixed assets, which are directly involved in production (machinery, equipment, vehicles, etc.). This indicates, on the one hand, a shortage of investment sources and, on the other hand, investor apprehension due to the deterioration of the general business climate in Belarus. </p> <p>   </p> <p> The decrease in the number of unfinished projects, along with other factors, may further indicate negative expectations of business entities regarding the future of the Belarusian economy. Companies prefer to focus on the completion of the initiated projects, postponing the launch of new projects in anticipation of the situation to get stable. </p> <p>   </p> <p> Foreign investors forced into wait-and-see mode </p> <p>   </p> <p> As for the sources of investment financing, the share of enterprises' own funds continued to dominate (42.2% of total investment in fixed assets against 40.6% a year earlier). </p> <p>   </p> <p> In spite of the earlier announced intentions of the authorities to substantially reduce the volume of state support, the second largest share are investments at the expense of budget funds. The share of funds from the national and local budgets in investments did not change during the year and amounted to 20.3%. </p> <p>   </p> <p> The third position is with investments in fixed assets at the expense of bank credits, the share of which is 14% (13.6% a year ago). Due to the National Bank’s limited access to liquidity tools, banks will continue to play a secondary role in financing investments this year as well. </p> <p>   </p> <p> Notably, foreign investment in fixed assets (excluding loans from foreign banks) has almost halved. According to Belstat, in 2020 the share of foreign investments in total financing of fixed capital decreased to 2.9% against 5.2% a year earlier. </p> <p>   </p> <p> In 2020, foreign investors started abandoning investment projects in the country amid the unfolding political crisis. A striking example is the indefinite suspension of construction of a hypermarket of the international chain Leroy Merlin. According to Leroy Merlin Bel, LLC, representing the retailer’s interests in Belarus, the project is frozen due to the coronavirus crisis and its financial implications. However, Leroy Merlin is not going to give up business development in Russia and Kazakhstan. Therefore, there are other reasons that made the retailer postpone the construction of hypermarkets in Belarus. </p> <p>   </p> <p> The accelerating relocation of personnel in the IT sector has also caused noticeable repercussions. In particular, in late October 2020, it became known that EPAM Systems would open a new office in Vilnius, wh ere it promises to employ about 600 highly qualified IT engineers. The Belarusian branch of EPAM Systems is the largest employer in the Minsk Hi-Tech Park. </p> <p>   </p> <p> The BEROC Economic Research Centre conducted a survey among 315 IT companies in December 2020. 48.6% of the companies that took part in the survey allow for relocation from the country, 4% are already relocating. IT companies consider the risks of the deepening political crisis and the associated outflow of personnel abroad to be high, as well as the risks of technical failures, such Internet shutdown. 42.5% of respondents believe it is likely that preferences for Hi-Tech Park residents will be reduced. Relocation may become massive if these risks materialise. </p> <p>   </p> <p> Hence, political uncertainty and the threat of new Western sanctions are scaring away potential investors. The situation is aggravated by a shortage of resources in the state budget, as well as ruble liquidity from banks amid the instability of the national currency. Under current conditions, Belarusian companies are forced to rely mainly on their own resources, while foreign investors who have already come to the country have to go into "standby mode" until the situation gets stabilized. End </p>

2021-02-09

Primepress