Belarus Suffers Economic Woes While Projecting Inner Tranquility

Belarus Suffers Economic Woes While Projecting Inner Tranquility

Publication: Eurasia Daily

By: Grigory Ioffe

The Jamestown Foundation

alyaksandr-lukashenka-in-china-edm-october-6-2016

Belarus’s current economic situation is a cause for concern. The decline in GDP by the end of 2016 will amount to 3 percent. Between January and August, the country led the entire Commonwealth of Independent States (CIS) on inflation: retail prices have grown by 7.6 percent; Azerbaijan is second with 6.4 percent (Naviny.by, September 28). Throughout 2015, the number of layoffs exceeded the number of new hires by 83,500; during the first eight months of 2016, the gap was 92,000. For an economy with 4,396,000 employees, such gaps are substantial (Tut.by, September 26).

In August, the largest contractions of the labor force were in the extractive industry, administration, education and construction. In contrast, labor gains were recorded in the social services sector, information and communications, as well as in research and development (Tut.by, September 26). The Belarusian government has asked the European Bank for Reconstruction and Development (EBRD) to find buyers for a number of medium-sized and reasonably well-managed state-owned enterprises. These include the brewery Krynitsa, a leading producer of aircraft plywood, a producer of passenger and cargo elevators, and other firms (Tut.by, September 27). However, the process of locating buyers and preparing for the respective transactions may take up to six years, whereas Belarus badly needs financial resources now.

President Alyaksandr Lukashenka’s three-day visit to China, which began on September 28, was also largely devoted to the economy. In particular, the trip was designed to find new niches for Belarusian goods, such as beef. China is Belarus’s fourth-largest trading partner and the second-largest source of the Eastern European state’s foreign imports. Throughout the first seven months of 2016, Chinese exports to Belarus amounted to $1 billion; Belarusian exports to China, however, were valued at only one-tenth of that amount (Nezavisimaya Gazeta, September 28).  The overall price tag of contracts signed by Lukashenka in China amounts to $11 billion. In this package, experts expect to see a shift from deals based on so-called “tied credit,” whereby Belarus is required to spend borrowed money on Chinese equipment, to direct investment (Tut.by, October 1).

Because economic decline has significantly depressed wages in Belarus, the opposition-minded civic campaign Speak the Truth issued an appeal to the government to delay raising the retirement age even more (it was recently raised to 63 years). Speak the Truth has also called on the authorities to postpone the elimination of subsidies on utility prices, despite the fact that the International Monetary Fund (IMF) expects such government assistance to be phased out in exchange for resuming its line of credit to Belarus. In the past, the opposition was indisputably in favor of such structural reforms regardless of their social cost. But today, the situation is different (Naviny.by, September 26). Some opposition-minded experts have suggested a link between the outcomes of Minsk’s negotiations with Moscow regarding the price of natural gas and Belarus’s readiness to undertake reforms as a precondition for obtaining IMF loans. The less Belarus is able to extract from Moscow, they argue, the more open it is to yield to the IMF’s requirements (Salidarnasts, September 26).

Apparently, the current stalemate in negotiations with Moscow has been difficult to overcome. Russia’s Deputy Prime Minister Arkady Dvorkovich stated there would be no concessions to Belarus (Pulse of the Day, October 1). In his turn, Lukashenka urged the head of Belarus’s Custom Committee to determine what kind of services are rendered to Russia at the points of entry to Belarus from the European Union so he can be better prepared to ask for financial concessions from Russia (Tut.by, September 26). In addition, there is some talk about the possibility that Belarus may begin receiving Iranian oil that could be channeled to the Mozyr refinery through the Ukrainian pipeline Odesa-Brody. In 2010, Belarus used Venezuelan and then Azerbaijani petroleum as a partial replacement for Russian oil. Today, a similar strategy might also make sense (Tut.by, September 26). So although the current economic situation in Belarus is more difficult to rectify than during the previous crises, attempts are being made to address existing structural problems.

Meanwhile, Minsk continues to project orderliness and calm. Electric trains to nearby Vilnius, Lithuania (a trip of just 2.5 hours plus visa requirements), are persistently full. Indeed, this author had a difficult time obtaining a ticket on a Sunday evening Vilnius–Minsk train as many residents of the Belarusian capital spend their weekends in Vilnius, where they also buy consumer goods. Whereas food costs much less in Belarus, textile and hardware products are cheaper and more versatile on the Lithuanian side of the border. Because of the devaluation of the Belarusian ruble, 30 percent fewer Belarusians in 2015 (compared to the year before) shopped at the Vilnius mall Akropolis, the closest shopping center from the rail and bus terminals (Belorusskii Partizan, March 4, 2015). The diminished (though still significant) flow of cross-border consumers has since stabilized.

A fixture of today’s Minsk are the day-long celebrations on Sundays of various national cultures, held near the capital city’s historic town hall (ratusha). Thus, on September 25, there was a warm and joyful celebration of Jewish culture. It included multiple ensembles, exhibitions, and demonstrations of religious symbols (Tut.by, September 25). Jews have lived in Belarus for about 700 years. In the late 1890s, the share of the Jewish population (about 14 percent) was probably higher in Belarus (located amidst the so-called Jewish pale of settlement) than anywhere else in the world. In 1926, Jews accounted for 40 percent of the population of Minsk. According to the last (2009) census, there were only 13,000 self-identified Jews in Belarus; nonetheless, there is a perception of lasting and largely friendly ties between the Jewish community and ethnic Belarusians.

The recent passing of former Israeli prime minister Shimon Peres, who was born in the village of Vishneva, some 100 kilometers west of Minsk, received much publicity (Belarus Segodnya, September 28). A local joke this author heard in conjunction with this sad event celebrates Belarusians’ peculiar altruism and generosity. After all, “we bestowed on Israel as many as five national leaders [Chaim Weizmann, Zalman Shazar, Mehachem Begin and Shimon Peres] and we have given ourselves only one.”

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