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25 Feb 2013

Better longer, but quietly

Belarus economy in 2012


Belarus Ministry of Economy presents economic results of 2012 and make some predictions for 2013

Risk-free source of development for Belarus in the "era of modernization" are foreign and domestic private investment, according to the Ministry of Economy. This idea is contained in the report of the Minister of Economy Nikolai Snopkov at the meeting of February 13, which was devoted to the results of 2012.


About  transparency
The report, which states positive assessment of the economy in 2012, also indicates systemic weaknesses, anticipates quite emotional text spokesman.

Noting that the Ministry of Economy pays great attention to the "feedback", the Ministry acknowledges that "in Belarus there are many serious economists."

"In this case, we see a significant difference between the estimates of economists, who base their statements on a thorough analysis of numbers, trends, and careful study of the criticized position, and popular commentary mediaperson who claim to be experts, discuss snatched out of context phrases and snatches of news feeds" - says the press office.

"Unfortunately, these are the comments as intended media effect  widely replicated and therefore the electronic and print media. This has led to the marginalization of the economic news" - lamenting press office, and notes that, by publishing the report, expects to reverse this trend in the hope of erudite reader.
Not being able to publish the report in full (it is available on the website of Ministry of Economics (http://www.economy.gov.by/dadvfiles/002092_256437_Doklad.pdf), still try to present some of its stories, trying to keep the context.

Target achieved
"In 2012, inflation has been reduced substantially stable exchange rate , remained and  for the first time in recent years the balance of goods and services was  positive (more than 2.9 billion USD, or 4.6% of GDP). This was one of the main factors significant improvement in the current account balance as compared with 2011 - by an estimated 3.2 billion USD ", - Minister's report begins with positive ratings.

He further states: "The target of the economy reached - restored the level of cash income. In December 2012 wages in dollar terms in the republic amounted to 552,2 USD, in the public sector - 417,7 USD".

However, Nicholas Snopkov draws attention to the fact that the implementation of the target resulted in an imbalance: the real wage growth significantly exceeded the growth in labor productivity.

The cause of the minister sees the strengthening of the positions of domestic demand to GDP growth. "Once in the growth of GDP (in 2012 - in the III quarter) begins to dominate the domestic demand, there is an imbalance," - he said.

At the same time, in his opinion, this is the only imbalance, which appeared in 2012.

"The country is much smaller and has borrowed through the work of the economy generated more currency. We started to move on due to life," - Nicholas Snopkov urged, noting that "the stimulus has been minimal."

Although this has led to some reduction in the rate of GDP growth, "it is the economic policy of contraction in domestic demand led to a balanced development" - insists the minister.

The system does not generate growth
Stressing that this policy was carried out deliberately, Nicholas Snopkov further argues that this was not the cause of a very low rate of GDP growth. The reasons, according to him, consist in the fact that, first, have not been fulfilled by performance of materials. "In case of reduction of the material assignments in industry amounted to minus 7.9%, which would increase the GDP by 1.7 percentage points," - said the Minister.

"Secondly, due to non-fulfillment of tasks on the growth of the industrial production of the overwhelming number of ministries and concerns shortfall of 0.1% of GDP," - explores the problem of low GDP Nicholas Snopkov. Failure in terms of jobs eventually led to the insufficient supply of goods for export, with the result that "in the economy and the loss of individual departments for the balance of payments is estimated at 2.6 billion USD", - cites Snopkov.

And here we come to the first contradiction in assessing the situation. Because the failed task and was just a consequence of contraction in domestic demand, which we have, "decompressed" by pumping credit from the state.

Minister sees this contradiction: flaws formed by the "master control positions," which, in his opinion, "confirms overly optimistic view that state-owned enterprises are managed by national authorities, able to generate strong growth in the usual control and bring volume indicators. "

Thus, for example, Nicholas Snopkov outcome of the economy last year, puts the first serious diagnosis of the Belarusian model.

Structural rigidities
And another feature of the domestic economy, he notices, pointing to the third option, which led to a low rate of growth of GDP - the decline in wholesale turnover, resulting shortfall of 1.2% of GDP.

It should be noted that the sharp decline in wholesale turnover in 2012 was due to a lower level in the supply of potassium for export and a sharp exception to trade supplies of solvents in the second half, although the report is the minister did not disclose details.

"This clearly characterizes the shortcomings of the economic structure, when the two positions (oil and potassium), depending on the volatility and external markets, greatly influenced the growth of GDP", - said Nicholas Snopkov.

"Today - thgis is the main domestic risk for economy, - concluded the minister, adding: "The structural rigidities of the economy compounded by insufficient momentary, value-added sectors of the economy. "

About upgrading
Insufficient level of value added in terms of investment growth - a characteristic feature of the Belarusian economy during the last 7 years, which indicates its low efficiency.

"No amount of investment generates high-quality growth, and effective return on investment," - makes it very unpleasant conclusion to the Belarusian model of economy minister.

"Calculations show that, in terms of the" classical "use of the state support of the enterprises are not directed at the development, and the application of funds" - continues to reveal shortcomings of the classical approach Nicholas Snopkov.

Noting that, in the framework of modernization begun by "the work is organized," and terms the slogan "is not an upgrade for the upgrade, and for the sake of economic growth," the minister in a special section entitled "Modernization", at the same time says: "Today, projects are shaped by money and not vice versa. "

"Even today to modernize further stated 3.5 billion USD investment. At what expense to meet this need? If this is not foreign sources (FDI) or domestic private, it needs external borrowing" - brings us to the Minister of Economy Home Recipes successful modernization of the section on economic security.

Next, to assess the possible impact of the "wrong" modernization, he explains that in this case, in 2013 the external public debt could rise to 17 billion USD (currently it is 12 billion USD, debt limit for 2013 set at 15 billion USD).

Probably, it is assumed that all the 3.5 billion USD for the modernization can bring only through external debt. Otherwise, increase national debt by 5 billion USD this year, is difficult to explain, especially as not wanting to see our government in 2013, the same amount in the currency.

Accordingly, the increase rate and the gross external debt continues to warn the minister of the economy, noting that "in the case of FDI nedoprivlecheniya extent required" (which, in his opinion, "it is likely in the current macro-economic conditions") gross external debt at end 2013 "once again exceeded the threshold of economic security."

The phrase "again exceeds" means that he is above the threshold of 55% of GDP. According to data presented in the graph H. Snopkov at the beginning of 2012 gross external debt was 63% of GDP at the beginning of this year - 55.1% of GDP at the beginning of the next, he is expected at 55.3% of GDP.

But "black" debt outlook - it's not all the possible "defects" modernization without attracting FDI. "The implementation of modernization plans also lead to a significant increase in imports of investment" - complements the picture of the Minister of Economy, and notes that, according to estimates, in 2013, in addition to imported capital goods worth at least 1.6 billion USD.

The modernization process also leads to an increase in imports of services (patents, transportation services), respectively, it also worsen the economic security index "balance to GDP," he explains.

"Arising balance of payments financing gap can be compensated either by reducing the reserves, either through currency devaluation" - shows the possible solutions to the problem of balance of payments and on Nicholas Snopkov briefly describes the effects of the devaluation.

"Funding from the devaluation of the national currency, as we know, leads to higher inflation, speculative demand for currency, an increase in interest rates (to ensure a positive value in real terms), the growth in the share of assets," - he said.

Finally, Nicholas Snopkov makes main conclusion: "The risk-free source of development are foreign and domestic private investment."

Thanks for your time
In the final words the speaker, as it should be, thanked everyone for coming. And it must be said that, the report Nicholas Snopkov, published last week, it did not hold.

Numerous comments and easy assembly of quotations from the report, despite the warning from the preamble of the press service of "the marginalization of the economic news" is often reduced to the thesis, which showed that the economy minister predicts devaluation and a sharp increase in government debt due to modernization.

As a result, it is in this perspective - can be modernized without devaluation - was asked Alexander Lukashenko during his visit to Minsk bakery on February 22. However, as BELTA journalists attributed this thesis "individual members of the so-called expert community."

"This is all news to me that some idiots in this country, the so-called expert community talk about the devaluation of the national currency in the name of some modernization. Modernization at this price we do not need" - protested the president, saying that "who- then again I want to shake up society, to scream about devaluation. "

It is not known whether Alexander Lukashenko read report Nicholas Snopkov comprehended, from "grow legs" appeared in "The Scream" to devalue. And anyway, it was a criticism of the minister or his interpreters?

Probably meeting all together and wishing once again reassure the population, Lukashenko said: "Today we have no need to devalue the currency. But if anyone thinks that upgrades can be made from the devaluation, I do not need this upgrade. I do not want to conduct periodic community through crises and shocks in order to construct a building or to put a new line. "

"We are better longer, but quietly hold this modernization" - without any economic calculations concluded Alexander Lukashenko.


Irina Krylovich
Belamarket.by

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