EDB predicts decline in Belarus’ economic activity amid political tension - overview
<p> MINSK, Nov 12 - PrimePress. The Eurasian Development Bank (EDB) forecasts a decline in economic activity in Belarus in the short term amid social and political tensions and increased volatility in the domestic financial market, reads the October edition of the EDB Macroeconomic Review. </p> <p> </p> <p> “The state of consumer demand and investment activity is affected by increased uncertainty in the conditions of socio-political tension and increased volatility in the domestic financial market, slower growth in household incomes, weak financial performance of enterprises and limited market lending. We expect these factors to continue to have a restraining effect on domestic demand in the coming months, and an additional risk is the acceleration of coronavirus spread in the country,” says the EDB survey. </p> <p> </p> <p> Belarus’ GDP fell by 1.3% year-on-year in September 2020 after growing by 1.2% year-on-year in August. As a result, the decline in the first nine months of 2020 was 1.3% year-on-year. “We expect business activity in Belarus to remain low in the short term in the current environment,” the review says. </p> <p> </p> <p> EDB analysts say domestic demand in Belarus in September 2020 remained restrained. Retail trade turnover fell by 0.4% year-on-year after a 1.6% year-on-year increase in August, while fixed investment fell by 3.4% year-on-year, mainly due to lower costs for the purchase of machinery, equipment and vehicles (minus 12.8% year-on-year). </p> <p> </p> <p> EDB experts note a slight increase in production activity due to the strong performance of individual industries. Thus, industrial output in September 2020 increased by 1.4% year-on-year (down 0.1% year-on-year a month earlier), which was facilitated by a 51.3% year-on-year increase in potash production against the low comparative base of 2019 (Belaruskali decreased output in autumn 2019 due to repair maintenance), as well as by the growth of the pharmaceutical industry. </p> <p> </p> <p> EDB experts note that in October the refinancing rate of the National Bank of Belarus remained unchanged at 7.75% per annum. In their opinion, short-term inflationary factors, mainly related to the transfer of the weakening of the Belarusian ruble to prices and increased inflationary expectations, prevented the regulator from reducing the key rate in October. </p> <p> On the other hand, the regulator would not raise the key rate due to medium-term disinflationary risks (primarily weak domestic demand) and the threat of negative impact of this step on the financial condition of enterprises. “We expect the refinancing rate to remain at 7.75% by the end of this year, but we assume the possibility of its increase in case of increased inflationary pressures,” EDB experts said. </p> <p> </p> <p> In addition, the National Bank of Belarus has extended until January 19, 2021 the period when permanently available operations to support and withdraw bank liquidity will be temporarily suspended. </p> <p> </p> <p> “This measure actually means maintaining the current nature of monetary policy, which was tightened in the second half of August 2020 due to increased inflationary risks against the background of increased volatility in the domestic financial market. The extension of restrictions in the context of increased funding costs for banks and the application of the estimated standard loan risk is likely to result in sustaining an increased interbank lending rate in the fourth quarter of 2020 and in restricting market borrowing by households and businesses,” EDB experts predict. </p> <p> </p> <p> The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB charter capital totals US $7 billion. The bank’s member states are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. End </p> <p> </p>
2020-11-13
Primepress
MINSK, Nov 12 - PrimePress. The Eurasian Development Bank (EDB) forecasts a decline in economic activity in Belarus in the short term amid social and political tensions and increased volatility in the domestic financial market, reads the October edition of the EDB Macroeconomic Review.
“The state of consumer demand and investment activity is affected by increased uncertainty in the conditions of socio-political tension and increased volatility in the domestic financial market, slower growth in household incomes, weak financial performance of enterprises and limited market lending. We expect these factors to continue to have a restraining effect on domestic demand in the coming months, and an additional risk is the acceleration of coronavirus spread in the country,” says the EDB survey.
Belarus’ GDP fell by 1.3% year-on-year in September 2020 after growing by 1.2% year-on-year in August. As a result, the decline in the first nine months of 2020 was 1.3% year-on-year. “We expect business activity in Belarus to remain low in the short term in the current environment,” the review says.
EDB analysts say domestic demand in Belarus in September 2020 remained restrained. Retail trade turnover fell by 0.4% year-on-year after a 1.6% year-on-year increase in August, while fixed investment fell by 3.4% year-on-year, mainly due to lower costs for the purchase of machinery, equipment and vehicles (minus 12.8% year-on-year).
EDB experts note a slight increase in production activity due to the strong performance of individual industries. Thus, industrial output in September 2020 increased by 1.4% year-on-year (down 0.1% year-on-year a month earlier), which was facilitated by a 51.3% year-on-year increase in potash production against the low comparative base of 2019 (Belaruskali decreased output in autumn 2019 due to repair maintenance), as well as by the growth of the pharmaceutical industry.
EDB experts note that in October the refinancing rate of the National Bank of Belarus remained unchanged at 7.75% per annum. In their opinion, short-term inflationary factors, mainly related to the transfer of the weakening of the Belarusian ruble to prices and increased inflationary expectations, prevented the regulator from reducing the key rate in October.
On the other hand, the regulator would not raise the key rate due to medium-term disinflationary risks (primarily weak domestic demand) and the threat of negative impact of this step on the financial condition of enterprises. “We expect the refinancing rate to remain at 7.75% by the end of this year, but we assume the possibility of its increase in case of increased inflationary pressures,” EDB experts said.
In addition, the National Bank of Belarus has extended until January 19, 2021 the period when permanently available operations to support and withdraw bank liquidity will be temporarily suspended.
“This measure actually means maintaining the current nature of monetary policy, which was tightened in the second half of August 2020 due to increased inflationary risks against the background of increased volatility in the domestic financial market. The extension of restrictions in the context of increased funding costs for banks and the application of the estimated standard loan risk is likely to result in sustaining an increased interbank lending rate in the fourth quarter of 2020 and in restricting market borrowing by households and businesses,” EDB experts predict.
The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB charter capital totals US $7 billion. The bank’s member states are Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. End