Belarus: Growth slows to over two-year-low in Q2
According to a second release by Belarus’ Statistical Institute (Belstat), the economy expanded 0.5% year-on-year in the second quarter, down from Q1’s 1.3% increase and marking the slowest expansion since Q1 2017.
Despite the moderation, domestic demand remained robust in Q2. Private consumption growth accelerated to 6.5% year-on-year (Q1: +5.4% year-on-year) amid a pick-up in retail sales in Q2, while government spending grew 0.6% year-on-year, after having flatlined in the previous quarter. Moreover, fixed investment expanded 5.7%, which was up from Q1’s 4.2% increase.
On the external front, however, a deteriorating global environment dragged on growth. Russia’s change of oil tax rules ended preferentially cheap oil sales to Belarus, which traditionally has used Russian oil as input for refined oil exports, creating negative spillovers on the country’s external sector. In Q2, exports of goods and services contracted 4.4% year-on-year, marking a sharper fall than in the previous quarter (Q1: -2.2% yoy). Meanwhile, imports of goods and services rebounded from a 0.1% contraction in Q1 to a 1.8% expansion in Q2.
Looking ahead, growth is expected to pick up slightly next year amid stronger export growth. However, on the domestic front, a weak business environment will drag on fixed investment, while household spending is seen softening as labor market dynamics turn less favorable. On the other hand, due to next year’s election, government spending is expected to increase, supporting overall activity.