Belarusian Economic Recovery May Downgrade Intended Reforms for Competitiveness

emerging europe belarus outlook ebrd

Read the Outlook on Belarus special report


David Dalton

About David Dalton

David Dalton is an analyst at the Economist Intelligence Unit covering Ukraine, Belarus and Poland. His country expertise includes the Baltics, Central Asia, CIS, Eastern Europe; and his specialist subjects are Economics, EU integration, Macroeconomics, Politics. David is currently responsible for The Economist Intelligence Unit’s economic and political forecasts for Ukraine, Poland, Belarus, Moldova, Estonia and Uzbekistan. He has degrees in economic and social studies from Manchester University and in transition economics from the University of London’s School of Slavonic and East European Studies.

The Economist Intelligence Unit (EIU) expects the Belarus economy to recover, only weakly in 2017-18, by just above 1 per cent, on average, from the protracted recession of 2015-16 which was Belarus’s first in 20 years. A modest rise in global energy prices, lifting Russian growth, will see the recently redenominated Belarusian rouble appreciate in 2017. This will encourage further disinflation, combined with weak domestic demand growth—although the rate of inflation will remain high in comparison to international figures.

The main question facing Belarus is whether it is capable of undertaking the sort of market-oriented structural reforms that are needed to raise export competitiveness, thus opening a path to the stabilisation of public finances. In the past, periodic fiscal crises have exposed the country to financial destabilisation and have forced a reliance on external funding.  On balance, the EIU doubts that such reforms will actually happen once economic recovery reduces their urgency.

There is little doubt that price liberalisation, greater privatisation and enforceable private property laws are among structural reforms that would change the incentives faced by economic actors. This would occur in ways that could spur competitiveness and innovation, raise export earnings and economic growth, as well as public and private incomes; relieve the strain on public finances and reserves and help to reduce the economy’s exposure to recurrent balance-of-payments crises.

Recent developments have shown that the government is tentatively trying out market-style reforms, while some specific features of the economy suggest that it is in a good position to benefit. The switch to a currency float, alongside the rise in world energy prices, has already helped to support the currency and to raise reserves. The government has liberalised some prices, cut some subsidies and raised some tariffs, in line with the latest rapprochement with the West. 

Moreover, Belarusian wages are low in comparison to international standards and official corruption is low compared to neighbouring regions. Put alongside a good educational system and a long industrial history, these factors should make Belarus relatively attractive to foreign investors. The EIU also suggests that foreign investment and know-how could deliver gains to productivity and living standards. The sectors that are often picked out for special mention in this regard are logistics and IT.

However, the international outlook is unpropitious. We expect Brexit, and other political and economic challenges in Europe, to hold EU growth back in the period 2017-21, at an annual average of 1.4 per cent. In Russia, real GDP growth will be limited to an annual average of 1.3 per cent, over the next five years, by debilitating structural hindrances, a poor business environment, low investment and political uncertainty.  

In 2018, we expect a “hard landing” in China, as the government attempts to rein in private debt by deflating the credit bubble. In the following year, the damage to confidence from an abrupt Chinese slowdown, alongside a tightening of US policy to coincide with the end of the business cycle, will lead to a mild recession in the US. This means that for emerging markets, such as Belarus, foreign demand growth in key markets, FDI and remittance inflows, as well as in aid, are likely to be much weaker than for those economies which have undertaken similar reforms earlier.

Political and geopolitical factors are likely to impede much-needed structural reforms even once a weak economic recovery is achieved. The old “social contract” of borrowing to boost wages and political support, followed by financial instability and then economic policy tightening, no longer appears viable. In particular, falling living standards and rising unemployment could generate social unrest. However, strong aversion to change within Belarus’s political system is an impediment to undertaking the necessarily disruptive political and institutional changes needed to see through substantive economic reform. 

In Belarus’s case, factors that militate against this include a weak opposition and a “conservative” political culture that has probably been reinforced by the demonstration effect of events in Ukraine. 

Empirical evidence suggests that authoritarian regimes are among the most stable. Moreover, the recent experience in Ukraine, and Russia’s annexation of Crimea, will continue to have a chilling effect on any democratising or liberalising reforms in Belarus. The chances of Belarus moving decisively in the direction of reform appear small, as long as the Putin regime remains in charge in Russia. For these reason, the EIU sees the regime muddling through with economic performance remaining suboptimal. 


The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.


Young Well-Paid IT Specialists Are Making Belarus Known Internationally

Foreigners choose Minsk and Gomel as Belarus’ most attractive FDI destinations

Is the CEE Region About to Steal the Outsourcing Crown From India?

Amazing view on the Taj Mahal in sunset light with reflection in water. The Taj Mahal is an ivory-white marble mausoleum on the south bank of the Yamuna river. Agra Uttar Pradesh India.

World Bank’s Doing Business Report 2016 Resume For Emerging Europe

The Country Shows Promise but Needs Some Reforms

The Next Four Months Crucial For the Belarus-EU Relations

21st century Manufacturing Arrives at Great Stone

Great stone

Belarusian Tech Companies Lead a Global Technological Advance in Outsourcing and Product Development

Using Words to Paint a Picture – Belarus’ Nobel Prize Winning Novelist

Belarusian Journalists Still Face Huge Problems

Germany and Belarus: Thinking Globally Acting Locally

The EU’s Benign Neglect of Eastern Europe

The EU Is Encouraging Belarus to Join the World Trade Organisation

The EU’s Benign Neglect Of Eastern Europe

One Belt One Road: a Big Task for Europe

FocusEconomics: Belarusian Economy to Grow in Q4 2016 and Onwards

Czechs Hold Emerging Europe’s Most Powerful Passport

Belarus Steps Up Liberalisation of Business


Belarus US Business Relations Thrive as Conditions Improve

Emerging Europe Makes Some Progress on Closing Gender Gap

world economic forum gender gap report

The Proof of a Country’s Readiness to Attract Foreign Investors Lies in the Development of the Insurance Market

Emerging Europe to Record Positive Growth Across the Board in 2018

coins growth

Are Labour Shortages Driving Economic Growth?

Belarus is the most creative EEU country

Feel the Vibe of the City of Minsk

Trinity suburb in Minsk (Nemiga) Belarus on 20 May 2017

Belarus Is Ready to Begin With Venture Capital Investments

The Eurasian Economic Union Fails to Bring Belarus Closer to Big Brother

Belarus: On the Way to a Market Economy?

The Great Stone Industrial Park — Making Doing Business Easy in Minsk

Emerging Europe and the EBRD host the Outlook on Belarus conference in London

“e-Belarus”: Embracing the Internet and its Possibilities

Outsourcing in Germany: Stop Talking at and Start Talking to

Serbia, Belarus and Ukraine Ranked Lowly by Wharton Business School

Kyiv Ukraine - April 172017: The postal square in Kiev on Podol the Dnipro river. view of the square from the river panorama

Winds of Change for Belarus’ Reinsurance Industry?

Despite Public Anxieties, Migration is Playing a Key Role in ECA Growth

Bratislava city aerial panoramic view. Bratislava is the capital of Slovakia.

Italy and Belarus: A Relationship Based on Complementarities and History

EY: Belarus’ IT Scene Is Thriving

High tech park minsk

New investors interested in Belarus’ Great Stone Industrial Park

Belarus: MOST Builds a Bridge to the Future

Why Was Zapad-2017 So Important?

russian tank belarus zapad

Encouraging SME’s Development Will Help Build Belarusian Economy

Long-time Neighbours Need to Share Awareness, Plus Trade & Investment

Belarus Is One of the Top Outsourcing Destinations of 2016

Belarus is Bringing Opportunities for European Companies

Great Stone

A Strategic Asset for Regional Growth and Development in the EU

Pier bridge crane and cargo handling cargo trains transported away.

Belarus: Changing Old Ideas And Mixing With the New in Belarus’ Export Market

‘No’ To a Monetary Union With Russia

The Reality Is More Interesting Than the Misconceptions

PandaDoc — Rolling Sales Procedures Together So Everyone Succeeds

Cautious Upturn in Emerging Europe Haunted by the Spectre of Uncertainty

Donald Trump

Belarus: The Importance Of Diversification

The Belarusian Banking Sector Moving Towards Modernisation Despite Some Challenges

Belarus Is Where the New Silk Road Heads For Europe

Breaking trade barriers with CIS has never been easier

Belarus Introduces New Business-Friendly Auditing Procedures

MINSK, BELARUS - AUGUST 15, 2016: Aerial view of the southwestern part of the Minsk with Palace of Sport and old and new other buildings. Minsk is the capital and largest city of Belarus.

The UK and Belarus: A Partnership to Introduce the Real Belarus to Europe

Business Opportunities in Belarus Encourage Outside Interest

Central And Eastern Europe At the World Property Market

UK Shores: the New Frontier, a View on a Series of Fortunate Events

The Deep Roots of Currency Crises in the Former Soviet Union

Belarus and Singapore Share the Same Factors for Economic Success

Foreign Investors: Belarus Offers Opportunities But Further Improvements Are Needed

Belarus Serves up Some Recipes for Success

Business in Belarus Recipe Book

Belarus-Turkey Investment Forum to increase investment and trade between the two countries

Belarus 2020: Turning the Vicious Circle Into an Upward Spiral

Business Mentors Helping to Solve Business Development Problems First

Portrait of confident business people interacting in the office

Not All Quiet on the Eastern Front

Will European Business and Institutions Bolster the New Trends That Have Appeared in Belarus?

The Belarusian Financial Sector: An Industry in the Process of Restructuring

The essence of the Customs Union is protectionism

Belarus’ Economy Is Slowly Recovering From Past Declines

HTP: Belarus’ Engineers Are Leading a Cool Revolution

Rolling Sales Procedures Together so Everyone Succeeds


EBRD Transition Report Highlights Financial Sector Resilience


Belarus: Navigating the geopolitical storm

Emerging Europe Live: CEE — The Outsourcing Destination

Germany Is Not Letting Belarus’ Small Downturns Put it off Looking for Investment Opportunities

Brexit Is a Great Opportunity to Attract Foreign Investors to Belarus

Slowly, Tech Brand Belarus Emerges

belarus tech

Bringing Belarus’ Cultural Past to Life for Belarusians and the World

While the EU Makes Plans for CEE China Makes Investments

Nuclear Security Summit In Washington, 2016

Lukashenka seeks to avoid commitment to Russia’s geostrategic goals

Belarus and the EBRD:
Working to Expand the Country’s Strengths and Success

Invest in Belarus: looking beyond politics to the future

Minsk International Airport Widens its International Reach


Putin Urges Belarus to End Oil Transit Through Lithuania

Athens Greece - May 27 2016: Russian President Vladimir Putin delivers

Emerging Europe Live: Life in Belarus As Seen by Foreigners

Innovation Brings Great Opportunities to the Belarusian Economy

EBRD Emerging Europe Outlook on Belarus 2016

IMF Believes State-Owned Enterprises Must Be Reformed

Image of the banknotes of new Belarusian banknotes five rubles put into circulation July 1 2016

From Denmark to Belarus — A Personal Experience of Business

Belarus Has Set an Example for Others to Follow

Falling Student Numbers and Declining R&D Result From Lack of Funds

Belarus Refinery Boss Upbeat Despite Challenges

oil refinery

High-Tech Park in Minsk is growing rapidly

Will the New Five-day Visa-free Regime Encourage More Visitors to Belarus?

A New Modern Mall Hopes to Draw Belarusians Back to the Home Market

RRY Capital

More EU Help for Belarus SMEs

GRODNO BELARUS - DECEMBER 13 2013: Seamstress in textile factory sewing with a industrial sewing machine .

Why Is Belarus Tech Booming?

The Belarusian Economy: The Challenges of Stalled Reforms

OECD: Belarus Has to Find Its Own Belarusian Model to Emerge

The Shopping Experience Is Set To Go Global in Belarus from 2017 Onwards

Under Promise, Over Deliver: Prospects for the EU’s Eastern Partnership in 2018

Eastern partnership

Belarusian Economy on a Diet to Change its Financial Outlook

Veni, Vidi, Vici, Or My Personal Experience of Doing Business in Belarus

Belarus Is Making the First Steps onto the International Finance Floor

Brexit Makes Waves Across the European Union and Beyond

Belarus Has To Make an Extra Effort To Change Investors’ Perceptions

The Belarusian real estate market is on the up

Office Space Vacancy is Currently Low but Building Standards Cause Concern

Minsk Belarus - March 23 2017 modern architecture business center Pokrovsky on Pobediteley Avenue editorial

Belarus’s Election Tests the EU’s Global Strategy

Georgia Leads Emerging Europe in Ease of Doing Business Report

Smart, reliable and promising

Mobilising Private Sector Investment in Belarus, Moldova & Ukraine


Leave a Reply

Your email address will not be published. Required fields are marked *