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18 Apr 2013

S & P upgrades Belarus to "positive"

Belarus economy

Standard & Poor's rating agency has revised its outlook on Belarusian economics from "stable" to "positive", noting the continued stabilization of the economy. Ratings is affirmed to 'B / B'.
S & P experts point out that the government has tightened fiscal and monetary policies, which helped to stabilize the economy. "In our view, a further reduction in inflation and easing pressure on the exchange rate are the main signs of improvement in the economic situation in the country", - the company reports.

Outlook "positive"means possibility of further upgrade the event of further decline in inflation, and if the deficit in the current account will remain relatively low, and the fiscal costs will continue to be maintained at a relatively stable level.

Experts also noted easing pressure on the exchange rate, suggesting some increase in confidence in the national currency.

At the same time, according to S & P, the rating of Belarus is limited by political risk, high needs for government funding and dependence on external financing. The reluctance of the government to carry out much-needed structural reforms to improve competitiveness and to improve the prospects of its growth is also one of the key negative rating factors.

However, the positive impact on the ratings have a relatively high ranking for a given level of GDP per capita ($6,700 in 2012), a moderate budget deficit, a significant amount of capital in the industry and highly skilled workforce.

"Economic growth in real terms in 2012 was 1.5%, and although this is below the target of government, it is, in our opinion, reflects the government's efforts to tighten macroeconomic policy. Against this background, the volume of consumption and investment in the public sector last year have decreased and the number of factors, including the positive effect of exchange rate depreciation and reduction of imports, contributed to the increase in net exports, which was positive in the 1st half of the year ", - the report says.

In the 2nd half of last year Belarus once again had trade deficit, which, according to experts, suggests that in absence of structural reforms aimed at improving competitiveness, the country remains vulnerable to external factors.

S & P said that in 2013, GDP growth will not exceed 3% (official forecast - 8.5%), and inflation will be on average 22%, provided that the NBB will maintain positive interest rates in real terms.

Experts predict increase in the deficit in the current account from the 3% of GDP in 2012 to about 6%, as the Belarusian export is facing increasing competition in Russia, a major export market.

In this case Russia, according to the rating agency, if necessary, will continue to provide significant support to Belarus in exchange for political and economic concessions.

"We could revise the outlook to" stable "if the resumption of expansionary policies, such as the presidential election in 2015, would again lead to pressure on the exchange rate and inflation. Other reasons for a downgrade could be a significant deterioration in external liquidity or access to external financing. deterioration of relations with Russia also put pressure on the ratings, "- warns S & P.

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