Belarus Needs To Secure Macroeconomic Stability and Undertake Sequenced Structural Reforms To Strengthen Competitiveness
March 28, 2014
Minsk, March 28, 2014 - Macroeconomic stability and fundamental structural reforms are important for putting Belarus on a sustainable growth path, says a World Bank Economic Update for Belarus.
A weak external environment, accumulated macroeconomic imbalances, and delays in structural reforms have put Belarus on a low growth path. Real GDP grew tepidly at 0.9 percent in 2013. This weak growth came mainly from expansion in domestic demand while net exports registered a sharp decline. Inflation stayed high at 16.5 percent by the end of the year. On the fiscal front, while government budget achieved a small surplus, recapitalization of state-owned banks weakened the fiscal position. Externally, current account deficit reached over 10 percent of GDP. The economic outlook for 2014 shows significant challenges ahead if global conditions remain weak, domestic macroeconomic problems continue, and structural reforms are delayed. Immediate corrective actions – macroeconomic stabilization and carefully-sequenced structural reforms – are needed to put Belarus on a robust growth path.
“The focus should be on tightening macroeconomic policies, even if this comes at the expense of economic growth in the short run. While macroeconomic stabilization and structural reforms could present immediate challenges, they are nevertheless urgently needed for reviving growth in Belarus in a sustainable and inclusive manner,” says Sebastian Eckardt, World Bank Senior Economist for Belarus.
In a Special Focus Note on Regaining External Competitiveness, the World Bank also pointed out that while trade performance in Belarus was dynamic over the past decade, external vulnerabilities have intensified because of declining competitiveness. Strengthening export competitiveness will require comprehensive policy reforms to improve the overall macroeconomic and business environment with targeted facilitation to overcome specific challenges faced by exporters. These policies would help strengthen its current comparative advantages and develop new sources based on greater technological sophistication, using existing core competencies and factor endowments.
“A strategic geographic location and an educated workforce create opportunities for Belarus to reap benefits of global trade and specialization,” noted Young Chul Kim, World Bank Country Manager for Belarus. “The World Bank Group attaches great importance to providing Belarus with timely advice in developing a long-term vision and implementing its structural reform agenda.”
The current World Bank investment lending portfolio in Belarus includes 4 operations for a total amount of USD 467.5 million. Since Belarus joined the World Bank in 1992, commitments to the country have totaled USD 955 million. In addition, grant financing totaling USD 23.7 million has been provided to about 30 programs including those with civil society organizations.
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