Belarus: GDP contracts severely in Q3
December 30, 2016
In Q3, GDP in Belarus decreased 3.5% from the same quarter last year (Q2: -1.4% year-on-year), according to data released by the National Statistical Committee (Belstat) on 30 December. Belarus’ economy has been performing poorly since 2015, when the global commodity price shock caused a recession in most oil and gas dependent nations, among them Russia, Belarus’ most important investment and trade partner. The economy is likely to have contracted at an over 3% rate again in 2016.
Private consumption fell 6.1% in annual terms in Q3, deteriorating from Q2’s 2.1% decline. The downbeat sentiment among struggling consumers was also reflected in declining retail sales for the July-to-September period. Real wages in Belarus have been falling as the economy is subdued and consumer price inflation remains at a double-digit rate. Government spending fell from a 0.3% increase in Q2 to a 0.1% drop in Q3. Gross fixed capital formation plummeted 20.9% in Q3, a drastic deterioration from Q2’s 11.2% decline. Persistent high interest rates coupled with dwindling financial resources have taken a toll on corporate balance sheets and the private sector’s ability to invest. With weak monetary policy transmission mechanisms in the highly dollarized country, the decline of the Central Bank’s refinancing rate seen in recent quarters has failed to lift fixed investment.
The outlook for Belarus is somewhat brighter, thanks to an expected IMF loan in H1 2017 and a likely return to economic growth in Russia within the next year. However, as the IMF pointed out in its last review, deep structural reforms remain necessary for the Belarusian economy to recover.