Belarus Economic Outlook
The economy likely grew more strongly in Q3 than in H1: Cumulative GDP rose 3.1% year on year in January–August (January–July: +2.9% yoy). Mining, manufacturing and construction output growth picked up, while wholesale and retail trade growth also accelerated. On the consumption front, a stronger credit expansion in July, lower inflation through August and higher wage growth halfway through the quarter bode well for spending in Q3. Less positively, the primary sector, which includes agricultural, forestry and fishing activity, deteriorated more than in H1. July also saw merchandise exports growth cool from H1’s average, pointing to mounting headwinds to external trade. In other news, border tensions with NATO members mounted recently—with Latvia, Lithuania and Poland tightening controls in August–September due to surging irregular migration from Belarus—boding ill for cross-border economic activity.
August saw inflation dip to 2.3% from 2.7% in July on lower price pressures for food. Average inflation is seen decreasing in 2023 compared to last year on a high base effect, strict price controls and muted economic momentum. Sharper-than-expected interest rate cuts and anti-inflationary measures potentially causing the emergence of parallel markets pose upside risks.