Belarus: GDP expands in Q1, reaching pre-pandemic levels
A preliminary estimate revealed that the economy expanded at an annual rate of 0.9% in the first quarter of the year, contrasting Q4’s 0.2% contraction. Q1’s print surpassed Q1 2019’s GDP figure, with the economy thus returning to pre-pandemic levels.
The improvement was driven by a vibrant industrial sector, chiefly due to production in the all-important manufacturing subsector—accounting for 23.4% of GDP in the period—which was up by 9.3% (Q4: +4.3% yoy). In addition, production in the electricity, gas, steam and air conditioning supply subsector swung to a 13.9% expansion after a fall of 3.3% in Q4. However, the construction sector was severely downbeat, declining 16.0% (Q4: -9.8% yoy). Moreover, wholesale and retail trade sank 0.4% in Q1, after growing 3.0% in Q4.
Looking ahead, the economy should continue to recover amid a buoyant manufacturing sector and higher electricity production thanks to the new Astravets nuclear power plant. That said, the recent sudden tightening of monetary policy threatens to hamper consumption expenditure, while uncertainty stemming from the political situation and a volatile global health situation could suppress capital spending. Meanwhile, falling international reserves threaten financial stability ahead, although the country is set to receive USD 500 million from Russia in a second tranche of a loan agreed last year, which should dampen risks.
On the outlook for the external sector, analysts at the EIU commented:
“Capital outflows will remain high in 2021 and political instability will constrain foreign direct investment and portfolio inflows. However, more than 40% of exports go to Russia, and Russia accounts for about the same proportion of total inbound investments, which should help to partially ease external-sector disruption.”