GDP, current $ billion
GDP per capita, current $
Life Expectancy at Birth, years 2018
Belarus has pursued a gradual transition path, characterized by limited structural reforms and a modest expansion of the private sector. Policies have focused on supporting state-owned enterprises (SOEs) with the help of subsidies and preferential loans through state-owned banks.
Economic growth during 2003–13 was accompanied by an impressive fall in the number of households below the poverty line and an increase in household income among the bottom 40 percent. The proceeds from that growth have been redistributed through real wage growth, utility subsidies, and the maintenance of employment in SOEs and the public sector.
Unfortunately, the factors that enabled Belarus’s past success are no longer in play. The capacity of capital accumulation to drive economic growth has been exhausted, the energy subsidies stemming from bilateral agreements with Russia are lower, and public debt ratios to GDP are growing. It is increasingly difficult to cover the savings-investment gap by foreign borrowing. Henceforth, improved living standards must come from higher productivity.
The economy is expected to contract by over 2 percent in 2020 as the COVID-19 global economic slowdown leads to a lower demand for Belarus’s exports of commodities and investment goods to the European Union (EU), Russia, and other countries. The contraction will be compounded by Russia’s “tax maneuver,” which will require fiscal tightening in response to a growing revenue shortfall. The economic contraction is likely to have a negative effect on household welfare, as the Government’s ability to support vulnerable households will be constrained by the limited fiscal space. In the near term, the main challenge is to ensure an orderly adjustment to the deterioration in Belarus’s external environment. Given the limited fiscal space and increasing financing needs, Belarus should urgently rationalize public expenditures to ensure that scarce public resources are spent in the right areas. More efficient spending will be critical to delivering savings that can be used to protect growth-enhancing investment, health, and education expenditures, ensure the delivery of public services, and cushion the downturn’s impact on the employment and incomes of low-income households through strengthened social protection spending.
These near-term policy measures need to be combined with medium-term structural reform. A sustainable improvement in living standards will therefore require an economic, social, and institutional transformation, with an enhanced role for private enterprise, a more efficient SOE sector, and strengthened social safety nets.