IMF mission sees Belarus’ GDP expand 1% in mid term

<p> MINSK, Dec 21 - PrimePress. The 2021 Article IV mission of the International Monetary Fund (IMF) has projected that Belarus’ gross domestic product (GDP) will grow by 1% in the medium term, reads the staff concluding statement of the IMF mission. </p> <p>   </p> <p> As previously reported, led by mission chief for Belarus Cheikh Gueye, an Article IV mission of the International Monetary Fund (IMF) operate in a virtual mode from 29 Nov to 17 Dec to make a traditional annual overview of Belarus’ economy. The mission conducted online meetings with representatives of Belarus’ economic bodies, the National Bank and experts. In Oct 2021, the IMF improved its forecast for Belarus’ GDP dynamics in 2021 by 2.5 percentage points from its April 2021 forecast (minus 0.4%) to 2.1%. The IMF forecast for 2022 promises Belarus a recovery growth of 0.5% of GDP (April’s forecast - 0.8%). Belarus’ GDP grew by 2.3% year on year in January-November 2021. In 2020, Belarus economy declined by 0.9%. </p> <p>   </p> <p> “Without structural reforms over the medium term, growth is forecast to gradually converge to its potential growth rate, which is estimated at about 1 percent, reflecting low investment and low productivity in the public sector. Risks to this outlook are large and revolve around geopolitical tensions, the possibility of further waves of COVID outbreaks, the impact of international sanctions, and contingent liabilities in the public sector. These major risks make a strong case for careful contingency planning,” says the concluding statement. </p> <p>   </p> <p> “Under current policies, over the medium-term, the economy is projected to settle around a low potential growth rate, but the downside risks to this outlook are high. With no major domestic disruptions and no further tightening of external economic conditions, this year’s post-recession rebound would be followed by modest real GDP growth of around 0.5 percent in 2022, as activity continues to be held back by the lingering effects of the COVID-pandemic, limited space for policy stimulus, and the effect of external sanctions,” the IMF experts said. </p> <p>   </p> <p> In their opinion, economic prospects remain challenging and policies need to focus on preserving macroeconomic stability in the face of shocks and tightening funding constraints. </p> <p>   </p> <p> The concluding statement says that a timely servicing of external obligations will likely require bringing the fiscal accounts into surplus. The National Bank of Belarus (NBB) will need to carefully manage its policies so as to bring inflation towards target without unduly restraining growth. </p> <p>   </p> <p> “Reducing the level of financial dollarization will be difficult under the prevailing circumstances, requiring better economic fundamentals. Regulators will need to follow developments in the financial sector closely. The sector reports relatively stable balance sheet indicators but financial sanctions-related roll-over risks and credit risks are rising. The reform of state-owned enterprises is critical as the sector continues to be a source of fiscal and external stability risks.” </p> <p>   </p> <p> “The economy recovered in 2021, but more recently growth has been weakening, while inflation is above target. After the relatively mild 2020 recession triggered by the COVID-pandemic, economic spillovers from Russia, and internal unrest, growth is expected to reach around 2 percent this year. Inflation has increased sharply and is now hovering around 10 percent, driven by the 2020 currency depreciation and increased global commodity prices. Nonetheless, the exchange rate has been stable in 2021, and the current account is expected to improve in 2021 to a surplus of 0.9 percent of GDP, helped by strong exports of goods and services.” </p> <p>   </p> <p> It is noted in the concluding statement that staff assessment is based on available data, which in some areas have shortcomings. “Changes in accounting regulations as a COVID relief measure reduce the reliability of source data and create breaks in time series. The authorities have discontinued providing decomposed trade data, making a full assessment of the external sector difficult. Finally, staff have not been able to discuss in full a medium-term macroeconomic framework for Belarus as the authorities shared detailed economic projections only until 2022.” </p> <p>   </p> <p> Belarus has been a member of the IMF since 1992. In 2009-2010, the IMF stand-by programme was implemented, under which Belarus received a loan of $3.46 billion. In April 2020, Belarus requested $940 million from the IMF as part of the rapid financing instrument to deal with the impact of the pandemic coronavirus. The request was rejected because of disagreements over the non-financial conditions of the allocation. </p> <p>   </p> <p> On 23 Aug 2021 as a result of the IMF general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion, Belarus was awarded a 0.14% quota - an SDR equivalent of about $925 million. The SDR allocation was intended to boost global liquidity amid the coronavirus pandemic. End </p>

2021-12-22

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