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Overview

  • Country Context

    BELARUS

    2021

    Population, million

    9.4

    GDP, current $ billion

    60.1

    GDP per capita, current $

    6,390

    Life Expectancy at Birth, years 2018

    74.5

    Belarus has pursued a gradual transition path, characterized by limited structural reforms and a modest expansion of the private sector. Economic growth during 2003–13 was accompanied by an impressive fall in the number of households below the national poverty line and an increase in household income among the bottom 40 percent of the population.

    Unfortunately, the factors that enabled Belarus’s past success are no longer in play. The capacity of capital accumulation to drive economic growth is exhausted, the energy subsidies stemming from bilateral agreements with Russia are declining and will be withdrawn by 2024, and public debt ratios to GDP are growing. Henceforth, improved living standards must come from higher productivity.

    Over the medium term, the challenge is to move toward an economy less dependent on oil processing, one that can be competitive as the implicit oil import price subsidies are withdrawn with the implementation of Russia’s “tax maneuver.” Anchoring fiscal sustainability in the medium term will require restructuring state-owned enterprises (SOEs) and rationalizing the public sector wage bill and tax expenditures. A robust social safety net and expanded unemployment support will be critical to maintaining the basic incomes of vulnerable households and facilitating the reallocation of workers.

  • Strategy

    World Bank Portfolio in Belarus

    No. of projects: 11

    Lending (IBRD): $1.15 billion

    GEF: 2 Grants ($6.39 million)

    The World Bank and Belarus

    The Country Partnership Framework (CPF) for FY18–22 was endorsed by the Board of Directors in April 2018. The World Bank Group’s assistance focuses on (i) creating opportunities to expand the private sector and promote more efficient public investment; (ii) maintaining the country’s human capital edge; and (iii) improving the contribution of infrastructure to climate change management, economic growth, and human development. These are supplemented by the cross-cutting theme of promoting greater use of data and access to information in public decision making.

    The World Bank’s active portfolio in Belarus is composed of 11 projects totaling US$1.15 billion. 

    A Performance and Learning Review (PLR) in 2021 will update the previous PLR to reflect COVID-19 and the new policy environment.

    Key Engagement

    World Bank–supported programs have delivered important development results with respect to transport infrastructure, water supply, forestry, energy efficiency, private sector development, public finance management, education, and health care.

    Advisory Services and Analytics have focused on the investment climate, SOEs, social protection, and utility tariffs, among other topics. The World Bank has advised the Government on policy actions that aim to increase the resilience of the domestic economy and strengthen the foundations for economic growth in Belarus.

    Among the expected results of World Bank activities:

    • 117,380 Belarusians living in 20 towns to benefit from the efficient use of renewable biomass in heat and electricity generation by 2022.
    • 4.5 million hectares of forests outside protected areas to be managed as biodiversity friendly by 2022.
    • An annual citizens’ budget, with information on the execution of the state budget, and a medium-term financial program to be introduced by 2021 to improve transparency.
    • 100 administrative procedures to be performed online through the e-registry by 2022 to ease conditions for private businesses in Belarus.
    • 25,000 students to benefit from an improved learning environment in general secondary schools by 2022.
    • 150 private micro, small, and medium-sized enterprises to get affordable financing for their growth by 2022.
    • An e-health system to soon become operational, and by 2023, the BelMAPO medical simulation center established and a modern neonatal department constructed.
    • Research facilities in 18 higher education institutions to be improved by 2022.
    • 230 fully equipped and functional intensive care units to be ready to manage severe cases of COVID-19 by 2022.
  • Recent Economic Developments

    In 2020, the economy contracted by 0.9 percent year-on-year, dragged back by external headwinds that were only partially offset by demand-side policy measures. The lack of mobility restrictions, coupled with subsidized lending to SOEs (about 1.6 percent of GDP), prevented a deeper contraction of industrial output, while sustained real wage growth supported consumption.

    During the second half of 2020, foreign exchange deposit withdrawals and household foreign exchange demand put strong pressure on the currency and on banking sector liquidity, accommodated by the spending of gross reserves (down 20.5 percent in 2020), increasing banks’ liabilities to non-residents. The weakening currency contributed to an acceleration in headline inflation to 7.4 percent at end-2020 from 4.7 percent in 2019. To prevent additional currency pressures, the National Bank switched from the provision of overnight loans to weekly auctions. To contain consumer inflation, the Government capped monthly price increases on basic food items and drugs beginning in February 2021.

    For the first time since 2009, the general government budget shifted into a deficit of 1.2 percent of GDP. Tax revenues dropped on lower revenues from profit tax and foreign trade, while capital expenditures and public sector wages increased. External public debt repayment pressures were alleviated through the issuance of Eurobonds (US$1.25 billion), RUR-denominated bonds (US$135 million), and loans from Russia and the European Fund for Sustainable Development (totaling US$1 billion).

    Although the national poverty rate remained unchanged in 2020 at 4.8 percent, this outcome was due to favorable dynamics in the Minsk City, Minsk, and Grodno regions. The poverty rate, at US$5.5/day purchasing power parity, remained stable at a low level (less than 1 percent).

    Economic Outlook

    The outlook is for a deepening recession in 2021 and a weak recovery thereafter, assuming negative domestic economic expectations, continued headwinds from the Russian “tax maneuver,” and the lack of structural reforms. Recently announced tax increases to contain the fiscal deficit and that of the pension system will hurt an already struggling private sector hit by the absence of support during the COVID-19 shock. With weak domestic demand expected to persist, the recovery is expected to be modest in the medium term, though slow growth will also help to compress imports and the current account deficit.

    This outlook is contingent upon the availability of external financing. In 2021, external financing needs, which will be closed by a combination of agreed debt refinancing from Russia and a drawdown of reserves, appear manageable. However, 2022–23 will be more challenging, as repayments on bilateral loans to Russia come due in 2022, and the principal repayments on the Eurobonds and the nuclear power plant loan in 2023.

    The Government’s ability to support vulnerable households is expected to weaken as a result of the limited fiscal space. Yet, measured at the World Bank’s US$5.5/day threshold, the welfare impact is projected to be small, with poverty rates increasing by 0.1 percentage point in 2021.

  • Highlighted Project

    Belarus Education Modernization Project

    Like many countries in the region, Belarus has faced a steady decline in its school-age population over the past two decades. In response, the Government has undertaken an ambitious effort to improve access to a quality learning environment and to consolidate the school network, adjusting the infrastructure in line with demographic trends. A national program objective is to improve the quality of secondary education and to optimize the network of general secondary education institutions.

    A World Bank–financed project is helping by:

    • Modernizing schools in rural areas and small towns through the rehabilitation of school facilities and the provision of the necessary laboratory equipment for physics, chemistry, biology, and information technology classes (64 schools have already been modernized and 236 schools are next in line)
    • Piloting and disseminating modern approaches to school learning environments
    • Modernizing management of the education sector and bringing it in line with international best practices by introducing an Integrated Education Management System and conducting training for school principals and educational professionals
    • Increasing the efficiency of the system of evaluating student learning by ramping up national and international assessments, including the Program for International Student Assessment (PISA). The availability of the PISA 2018 results is now allowing Belarus to adequately assess the quality of its education program relative to other countries and to identify any problems with regard to equal access to quality education

    In total, the project will improve learning conditions for 65,000 students from all over Belarus.

    Image
    A school in the city of Voronovo (Grodno oblast), renovated with support from the World Bank project. Now, more than 1,000 students have access to modern physics and chemistry classrooms, computers, a library with places for individual training, classes for after school extension for 80 children, and a modern gym. A barrier-free environment has also been established, providing special lifts and toilets.
     

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    Briefs on active projects in Belarus (PDF)


LENDING

Belarus: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

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Country Office Contacts

Minsk, +375-17 359-19-50
6 Rumyantseva Street, 220034 Minsk, Belarus
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