Belarus Economic Forecast

In January–April, monthly GDP declined by 0.6%, the strongest cumulative rate in over a year (January–March: -2.1%). Merchandise exports growth skyrocketed to nearly 50% in March. Moreover, rebounding industrial output in February–April likely aided the economy, as did slowing inflation, which eased to the lowest rate since February 2020 in April. Recovering wage growth in March–April will have further boosted household spending: Retail sales grew for the first time in 11 months in April. Meanwhile, on 31 May, the key policy rate was cut to the lowest level since the start of the war in Ukraine, easing some of the pressure on spending and investment. In other news, Russia and Belarus signed a formal agreement in late May to deploy Russian nuclear weapons in Belarus, which could provoke further Western sanctions and economic isolation.

Inflation fell to 4.6% in April (March: 5.8%), largely on a strong base effect for food prices. Despite the bite from the war’s spillovers, price pressures this year should cool from 2022’s eight-year high on a base effect, strict government price controls and an ailing economy. The emergence of parallel markets arising from anti-inflationary measures poses an upside risk.