Focus on public sector accumulates imbalances in Belarus’ economy – experts
<p> MINSK, Dec 28 - PrimePress. Belarus keeps prioritizing the inefficient and overly extensive public sector, which accumulates imbalances in the economy, and may produce extremely adverse effects, says the Russian Sberbank's Centre for Macroeconomic Research (CMR). </p> <p> </p> <p> Political crisis causes turbulence in the banking system </p> <p> </p> <p> CMR experts say that unlike other countries, Belarus faced two types of shocks in 2020: economic and political. </p> <p> </p> <p> The limited financial capacity to support the economy during the pandemic prompted the country’s leadership to abandon the imposition of strict quarantine restrictions. This strategy and traditional tools to support domestic demand through public sector enterprises helped curb the recession. Even despite the suspension of oil supplies early this year, the decline in gross domestic product (GDP) by the end of 2020 is estimated at 1%. </p> <p> </p> <p> The political crisis caused serious turbulence in the banking system. The National Bank of Belarus (NBB) had to limit its liquidity provision operations amid rapidly growing expectations for a drop of the Belarusian ruble. Interest rates in the credit and deposit market rose, lending in many segments virtually stopped. </p> <p> </p> <p> “Despite tight credit terms set for the private sector, state-owned enterprises continue to receive credit support in the form of new loans and massive restructurings. The stake on the inefficient and overly extensive public sector accumulates imbalances in the economy, which may lead to extremely negative consequences in the future,” says the CMR. </p> <p> </p> <p> Sberbank estimates economic growth in Belarus at 1% in 2021 </p> <p> </p> <p> CMR experts say the economic landscape of Belarus in 2021 will be determined by several factors, primarily the pandemic. Despite the presence of internal problems, the global agenda remains an important factor that influences external demand. Belarus’ exports in both physical and monetary terms will depend on the speed of global economic recovery. </p> <p> </p> <p> The nature and dynamics of political tensions will determine, among other things, the stiffness of the policy of the National Bank of Belarus, the trajectory of the Belarusian ruble and inflation. </p> <p> </p> <p> The relationship with Russia remains one of the key factors determining the prospects of the Belarusian economy. </p> <p> </p> <p> “As the main trade partner, Moscow provides substantial direct and indirect support to Belarus in the form of loans, investments and energy subsidies. One more surge of tension can drive the Belarusian economy into a deep recession and postpone the post-crisis recovery indefinitely,” reads the report. </p> <p> </p> <p> In the meantime, Belarus continues the economically dangerous discussion of the resumption of money emission to credit state-run enterprises. This can bring the country back to 2011-2012, when a sharp increase in money supply led to hyperinflation. </p> <p> </p> <p> In its baseline scenario for 2021, Sberbank expects a gradual recovery of the global economy, alleviated political tensions, continued support from Russia and the abandonment of the idea to print extra money to finance state-owned enterprises. Provided that there will be no new shocks, Belarus can show anemic GDP growth by about 1%, says the CMR. End </p> <p> </p>
2020-12-29
Primepress
MINSK, Dec 28 - PrimePress. Belarus keeps prioritizing the inefficient and overly extensive public sector, which accumulates imbalances in the economy, and may produce extremely adverse effects, says the Russian Sberbank's Centre for Macroeconomic Research (CMR).
Political crisis causes turbulence in the banking system
CMR experts say that unlike other countries, Belarus faced two types of shocks in 2020: economic and political.
The limited financial capacity to support the economy during the pandemic prompted the country’s leadership to abandon the imposition of strict quarantine restrictions. This strategy and traditional tools to support domestic demand through public sector enterprises helped curb the recession. Even despite the suspension of oil supplies early this year, the decline in gross domestic product (GDP) by the end of 2020 is estimated at 1%.
The political crisis caused serious turbulence in the banking system. The National Bank of Belarus (NBB) had to limit its liquidity provision operations amid rapidly growing expectations for a drop of the Belarusian ruble. Interest rates in the credit and deposit market rose, lending in many segments virtually stopped.
“Despite tight credit terms set for the private sector, state-owned enterprises continue to receive credit support in the form of new loans and massive restructurings. The stake on the inefficient and overly extensive public sector accumulates imbalances in the economy, which may lead to extremely negative consequences in the future,” says the CMR.
Sberbank estimates economic growth in Belarus at 1% in 2021
CMR experts say the economic landscape of Belarus in 2021 will be determined by several factors, primarily the pandemic. Despite the presence of internal problems, the global agenda remains an important factor that influences external demand. Belarus’ exports in both physical and monetary terms will depend on the speed of global economic recovery.
The nature and dynamics of political tensions will determine, among other things, the stiffness of the policy of the National Bank of Belarus, the trajectory of the Belarusian ruble and inflation.
The relationship with Russia remains one of the key factors determining the prospects of the Belarusian economy.
“As the main trade partner, Moscow provides substantial direct and indirect support to Belarus in the form of loans, investments and energy subsidies. One more surge of tension can drive the Belarusian economy into a deep recession and postpone the post-crisis recovery indefinitely,” reads the report.
In the meantime, Belarus continues the economically dangerous discussion of the resumption of money emission to credit state-run enterprises. This can bring the country back to 2011-2012, when a sharp increase in money supply led to hyperinflation.
In its baseline scenario for 2021, Sberbank expects a gradual recovery of the global economy, alleviated political tensions, continued support from Russia and the abandonment of the idea to print extra money to finance state-owned enterprises. Provided that there will be no new shocks, Belarus can show anemic GDP growth by about 1%, says the CMR. End